Feb 062017
 
 February 6, 2017  Posted by at 10:04 am Finance Tagged with: , , , , , , , ,  6 Responses »
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Steve Schapiro Robert Kennedy US Presidential Campaign 1968

 


Trump Travel Ban- What Happens Now (BBC)
Trump Faces Uphill Battle To Overcome Court’s Hold On Travel Ban (R.)
President Trump’s Major Asian Breakthrough (CNBC)
Believe It Or Not, Deluded Republicans Have Got It Right On Tax Reform (Chu)
Is America in a Bubble & Will America Ever Return to “Normal” (CH)
Trump Is No Fascist. He Is A Champion For The Forgotten Millions (G.)
India Weighs Up The Return On Basic Income For The Poorest (G.)
Scotland Needs Publicly Funded Bank, Says Thinktank (G.)
Greek Debt Crisis: An Existentialist Drama With No Good End In Sight (G.)
Testing Europe’s Values (NYT)
EU Leaders Back Libyans To Curb New Migrant Wave (R.)
Hunger Strikers At Greek Refugee Camp Keep Minister, Police Out (K.)

 

 

It’ll be hard for any court to claim the ban is legal. The fact that is was obviously hastily slapped together doesn’t help Trump’s case. And there are a variety of additional cases pending.

Trump Travel Ban- What Happens Now (BBC)

The next step is for briefs to be filed by both sides for a formal review of Judge Robart’s suspension on Monday. The Justice Department could have appealed directly to the Supreme Court on an emergency basis, but it chose not to since the appeal court is moving fairly quickly. If the appeals court decides the stay is valid – perhaps as early as next week – then a Supreme Court appeal is almost certain. In the meantime, everything is on hold. US immigration processes continue as they did before Mr Trump issued his executive order. If it looks like this is bogging down, the president might eventually decide to modify the order rather than try to defend its legality. That’s probably the most prudent course, but he’s a stubborn man.

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“I think the court’s going to feel every reason to stay on the sidelines as long as possible..” If there is no swift decision, and it doesn’t look that way, the order will have to be significantly changed, perhaps so much it largely becomes moot.

Trump Faces Uphill Battle To Overcome Court’s Hold On Travel Ban (R.)

U.S. President Donald Trump faces an uphill battle to overcome a federal judge’s temporary hold on his travel ban on seven mainly Muslim countries, but the outcome of a ruling on the executive order’s ultimate legality is less certain. Any appeals of decisions by U.S. District Court Judge James Robart in Seattle face a regional court dominated by liberal-leaning judges who might not be sympathetic to Trump’s rationale for the ban, and a currently shorthanded Supreme Court split 4-4 between liberals and conservatives. The temporary restraining order Robart issued on Friday in Seattle, which applies nationwide, gives him time to consider the case in more detail, but also sends a signal that he is likely to impose a more permanent injunction.

The Trump administration has appealed that order. The San Francisco-based 9th U.S. Circuit Court of Appeals said late on Saturday that it would not decide whether to lift the judge’s ruling, as requested by the U.S. government, until it receives briefs from both sides, with the administration’s filing due on Monday. Appeals courts are generally leery of upending the status quo, which in this case – for now – is the suspension of the ban. The upheaval prompted by the new Republican administration’s initial announcement of the ban on Jan. 27, with travelers detained at airports upon entering the country, would potentially be kickstarted again if Robart’s stay was lifted. The appeals court might also take into account the fact that there are several other cases around the country challenging the ban.

If it were to overturn the district court’s decision, another judge somewhere else in the United States could impose a new order, setting off a new cascade of court filings. If the appeals court upholds the order, the administration could immediately ask the U.S. Supreme Court to intervene. But the high court is generally reluctant to get involved in cases at a preliminary stage, legal experts said. The high court is short one justice, as it has been for a year, leaving it split between liberals and conservatives. Any emergency request by the administration would need five votes to be granted, meaning at least one of the liberals would have to vote in favor. “I think the court’s going to feel every reason to stay on the sidelines as long as possible,” said Steve Vladeck, a professor at the University of Texas School of Law.

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Interesting take on power politics.

President Trump’s Major Asian Breakthrough (CNBC)

On a visit to Tokyo and Seoul last week, the U.S. Defense Secretary James Mattis (a) reaffirmed security guarantees to Japan and South Korea, (b) set the stage for an integrated American, Japanese and South Korean political, economic and military alliance, (c) opened the way for President Trump to knock heads together in Tokyo and Seoul to set aside their divisive historical grievances if they wanted Washington’s umbrella and (d) told Pyongyang that our nuke operators knew the return address for a swift and devastating response if they ever saw a wrong move on their X-band radar. That is a major breakthrough because no previous administration succeeded in binding these three countries in such a strong and integrated alliance. Japan was repeatedly blamed for scuttling these efforts by its allegedly defiant attitude toward Korean grievances.

Japan also wanted to make money in China while leveraging American protection in its territorial disputes with Beijing. As recently as 2014, a quarter of Japan’s exports and a third of its foreign direct investments were going to the Middle Kingdom. But Tokyo would run for cover in Washington whenever the Chinese navy and air force would challenge Japan’s presence on the Senkaku/Diaoyu islands in the East China Sea. At the same time, Japan was enjoying annual trade surpluses with the U.S. of $67-$70 billion. And just a week ago, the Japanese were telling Washington that they could not buy American cars because the steering wheel was on the wrong side. [..] That has to stop. And it, apparently, will stop. Japan’s Prime Minister Shinzo Abe is coming to Washington next Friday (Feb. 10) with trade and investment initiatives.

But, true to form, whatever that is will probably fall far short of a trade deal Washington needs to address its excessive and structural trade imbalances with Japan. We have an even worse trade record with South Korea. Since the free-trade agreement became effective in early 2012, our trade deficit with Seoul has nearly doubled to an estimated $30 billion in 2016. Maybe we have to take a look at that, too. Building on last week’s accords, Washington has an opportunity to conclude an appropriate trade arrangement with Japan and South Korea. That would cover nearly 25% of the global economy and would represent by far the world’s largest free-trade area. Such an agreement would attract other Asia-Pacific countries to permanently anchor a decisive American political, economic and security presence in that part of the world. Washington’s bargaining power with China would be greatly strengthened by these events in a negotiating process that is apparently already under way.

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“..the great advantage of this reform is that it would eliminate the incentive for multinational firms to dodge their US corporate taxes through accounting tricks..”

Believe It Or Not, Deluded Republicans Have Got It Right On Tax Reform (Chu)

[..] we find ourselves in the paradoxical situation where a reform being presented by deluded right-wing American politicians as a way of sticking it to cheating foreigners actually represents the world’s best chance for lancing the boil of rampant tax evasion by multinational companies. It is the right thing being pushed for the wrong reasons. To understand why, we need to look at the plan in more detail. The Republican plan would replace the US corporation tax, an annual levy on a firm’s reported profits, with a new levy on a company’s domestic cash flow. It means taxing a company’s domestic sales at a certain rate, probably 20%, after it has subtracted its domestic costs such as workers’ wages and the amount the firm has spent on investment in new factories and equipment.

The objective would be to tax a company’s economic activity in America, which means that it would be able to reduce its tax bill by the value of its exports, while imports would be part of its taxable liability via a “border adjustment tax”. That probably sounds mind-numbingly complicated, but the principle is actually quite simple: it means taxing the firm’s value-adding and substantive economic activity in the country where that activity actually takes place. This is most people’s idea of what a tax on corporate income is supposed to do. Many have objected that US firms that import heavily will be placed at a major tax disadvantage. Yet this impact would be entirely offset by a rise in value of the US dollar, which would follow the implementation of the reform, and which would increase the purchasing power of importers proportionately.

And for all Brady’s rhetoric and the protectionist-sounding border tax, the effect of the reform would actually be neutral on America’s terms of trade with the rest of the world. But the great advantage of this reform is that it would eliminate the incentive for multinational firms to dodge their US corporate taxes through accounting tricks, such as registering profits at subsidiaries abroad and relocating their corporate headquarters to tax havens. No matter where they based their headquarters, multinationals would be liable for a hefty US tax bill if they sold plenty of products and services in America. And if America, the world’s largest economy, were to institute this reform, there would be a powerful incentive for other countries – including Britain – to implement a similar reform.

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Bubbles everywhere.

Is America in a Bubble & Will America Ever Return to “Normal” (CH)

Analysts and talking heads have an awful lot of opinions. Are we in a bubble or aren’t we? Rather than offer another opinion, I’ll offer the relationship of US economic activity (GDP) against the Wilshire 5000 (representing US equities) and the Federal Reserves gauge of American wealth, Z1 Household Net Worth series. These are the preferred establishment gauges, so take a look and then you decide. GDP is a monetary measure of the market value of all final goods and services produced annually in the US. The chart below shows the annual real GDP growth decelerating since 1950.

GDP vs. US Household Net Worth Given the sharp rise in asset values, I thought it worthwhile to view the total increase, as shown by the Fed’s US Household Net Worth data, versus the growth in GDP. The chart below shows US household net worth (all inclusive with real estate, equities, and all asset classes) is fast approaching $92 trillion against US GDP of $18.6 trillion. A simple division of GDP as a % of HHNW (maroon line in the chart below) shows household net worth (asset values) is growing significantly faster than economic activity supporting those valuations.

[..] from 1950–>2000, the average GDP to HHNW ratio was somewhat consistent around 28%…if the HHNW and GDP ratio are to come back to their 50 year norm (before they were warped by long periods of near Zero Interest Rate Policy and actual ZIRP)…there are two basic options: Either, GDP rapidly rises $7 trillion (a 38% increase)… Or, the other option is a 28% decline in HHNW, or a contraction of $25 trillion. A $25 trillion decline in HHNW would equate to an average $200,000 decline in net worth for every household in America.

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Provocative headline for a useful reminder.

Trump Is No Fascist. He Is A Champion For The Forgotten Millions (G.)

For many Americans, Hillary Clinton personified the corruption and self-dealing of the elites. But Trump’s election wasn’t just a rejection of Clinton, it was a rejection of politics as usual. If the media and political establishment see Trump’s first couple of weeks in office as a whirlwind of chaos and incompetence, his supporters see an outsider taking on a sclerotic system that needs to be dismantled. That’s precisely what many Americans thought they were doing eight years ago, when they put a freshman senator from Illinois in the White House. Obama promised a new way of governing – he would be a “post-partisan” president, he would “fundamentally transform” the country, he would look out for the middle class. In the throes of the great recession, that resonated.

Something was clearly wrong with our political system and the American people wanted someone to fix it. After all, the Tea Party didn’t begin as a reaction against Obama’s presidency but that of George W Bush. As far as most Americans were concerned, the financial crisis was brought on by the excesses of Wall Street bankers and the incompetency of our political leaders. Before the Tea Party coalesced into a political movement, the protesters weren’t just traditional conservatives who cared about limited government and the constitution. They were, for the most part, ordinary Americans who felt the system was rigged against them and they wanted change.

But change didn’t come. What they got was more of the same. Obama offered a series of massive government programmes, from an $830bn financial stimulus, to the Affordable Care Act, to Dodd-Frank, none of which did much to assuage the economic anxieties of the middle class. Americans watched as the federal government bailed out the banks, then the auto industry and then passed healthcare reform that transferred billions of taxpayer dollars to major health insurance companies. Meanwhile, premiums went up, economic recovery remained sluggish and millions dropped out of the workforce and turned to food stamps and welfare programmes just to get by. Americans asked themselves: “Where’s my bailout?”

At the same time, they saw the world becoming more unstable. Part of Obama’s appeal was that he promised to end the unpopular wars in Iraq and Afghanistan, restore America’s standing in the international community and pursue multilateral agreements that would bring stability. Instead, Americans watched Isis step into the vacuum created by the US withdrawal from Iraq in 2011. They watched the Syrian civil war trigger a migrant crisis in Europe that many Americans now view as a cautionary tale. At home, Isis-inspired terrorist attacks took their toll, as they did in Europe. And all the while Obama’s White House insisted that everything was going well.

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A basic income where dozens of millions have no access to bank accounts. Curious.

India Weighs Up The Return On Basic Income For The Poorest (G.)

[..] the transformative potential championed by UBI advocates has particular appeal in a country such as India, where one in five people lives below the $1.90 (£1.51) poverty line, 1 million join the workforce each month, and a clunky, corrupt bureaucracy oversees nearly 1,000 separate welfare schemes. There have already been Indian trials. Three years ago, in nine villages in Madhya Pradesh state, 6,000 people were each given a monthly payment of up to 300 rupees an adult, and half that much for every child, over a period of 18 months. Every six months, the impact of the payments was assessed against 12 villages that received no income, just the usual government welfare. “What we saw were huge improvements in nutrition, health, schooling and sanitation,” said Guy Standing, a British economist who helped run the trials.

Results published afterwards showed the consumption of lentils, chickpeas and other pulses increased tenfold. Villagers ate six times more meat and the uptake of fresh vegetables grew 888%. That meant residents of the village were healthier, worked harder and attended school more often. Equity between more socially dominant members of the community – traditionally the gatekeepers to resources – and the less powerful also improved, Standing said. “Women benefited more than men, the disabled benefited more, and scheduled [lowest] castes benefited more than others.” India’s government is clearly enamoured by the idea. Subramanian suggested even Gandhi would approve. He praised the basic income’s potential to reduce poverty “in one fell swoop”, to relieve the grinding stress of hunger, and empower Indians to make their own life choices.

Criticisms – such as the idea people would fritter the money on alcohol or drugs, or drop out of the workforce – he dismissed based on past research. On paper, the sums also add up. Subramanian calculates that the annual income required to enable all but the very poorest Indians to escape penury is about 7,620 rupees (£90) a year. If that sum were given to 75% of India’s billion-plus population, it would cost about 5% of GDP. India’s vast welfare schemes and subsidies for food, petrol and fertilisers are notoriously wasteful and poorly targeted. Cutting them entirely would save about 2% of GDP. Reducing “middle class” subsidies on things such as railway tickets and gold would save another 1%. The rest of the savings might be found in scrapping other government schemes, which altogether cost 3.7% of GDP.

It would be even cheaper if the basic income were targeted at women, for example, or if the wealthy – those who own cars or air conditioners – were excluded, or asked to opt out. Giving Indian women a minimal basic income would cost just over 1% of GDP, but have “large multiplier effects” on the entire society, Subramanian said.

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Good topic to discuss. Get big banks out of your lives. It’s a Wonderful Life.

Scotland Needs Publicly Funded Bank, Says Thinktank (G.)

The Scottish government is under growing pressure to replace its private finance programme with a publicly funded bank to build new schools, roads and hospitals. The Common Weal, a pro-independence thinktank, said it should also replace the Scottish Futures Trust (SFT), the government agency that champions private financing projects such as a new Aberdeen bypass contract, which is worth £1.5bn to the private consortium building it. Common Weal said there was an urgent requirement to set up a Scottish national investment bank that would use £1.35bn in public funding for construction projects and another £2bn from investors to replace more expensive private financing.

The SFT would be replaced by a new publicly owned investment company and the two bodies would fund national infrastructure projects, new low-carbon energy schemes and local council programmes, as well as offering low-cost loans to small businesses, it said. The thinktank’s campaign to push for the changes has the backing of the Unison and Unite unions, the thinktank New Economics Foundation and the London-based campaign Debt Resistance UK. It has won support from Labour MSPs as well as Jeremy Corbyn. The Labour leader told an audience in Glasgow last month that his party would set up a national investment bank at UK level and regional banks for Scotland, Wales and Northern Ireland. They would focus on “fast tracking infrastructure spending to building essential transport and digital links to realise our potential”, he said.

Common Weal’s call for a Scottish national investment bank is to be debated at the SNP’s spring conference in March, an indication of growing unease within the the party about the private finance model being used by Nicola Sturgeon’s government. The motion from an SNP branch in Angus near Dundee says leaving economic growth and environmental protection “solely in the hands of our private banking and financial sector will be detrimental to present and future living standards of our citizens”.

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“The euro’s recent weakness has nothing to do with a deliberate attempt by the Germans to reduce its value..” Wrong. All Germany has to do to keep the euro low is to strangle southern Europe.

Greek Debt Crisis: An Existentialist Drama With No Good End In Sight (G.)

Put three people in a room who can’t get on with each other. Condemn them to stay there for all eternity while they torture each other. Sit and watch as the gruesome story plays out. And what do you have? One answer is the 1944 existentialist play by Jean-Paul Sartre, Huis Clos. Another is the story of the neverending Greek debt crisis in which the three main characters are Alexis Tsipras, Wolfgang Schäuble and Christine Lagarde. [..] Tsipras plays one of the three lead parts in the play. Elected as a leftwing firebrand two years ago, Tsipras has had a rapid fall from grace. He caved in when pressure was put on him by the Europeans in the summer of 2015 and having run for office on an anti-austerity programme eventually agreed to even more draconian bailout terms than the previous centrist governments.

For an increasing number of Greeks, Tsipras is no longer an iconoclast; he is just another man in a suit. With public support waning, Tsipras is once again hanging tough. He aroused the ire of the Europeans by giving a Christmas bonus to pensioners and free school meals to poverty-stricken families. Europe responded by suspending the limited debt relief it has previously granted. Tsipras says Greece has already done enough and will suffer no more. Europe is played by Schäuble, the German finance minister. He too is facing political pressures. The German public thinks enough aid has already been given to Greece, a country it considers is not doing enough to help itself. Opposition to further debt relief is strong and a general election is looming. The third cast member is Lagarde, a former French finance minister and now managing director of the IMF. Under its own rules, the IMF is forbidden from putting money into a bailout if it thinks debt is unsustainable.

There have been reports coming out of Washington that the Fund believes Greece’s debt will rise to 275% of national income by 2060, which would undoubtedly put it into the “unsustainable” category. The latest act in this play takes place in Washington this week when the IMF’s governing executive board discusses Greece. One factor complicating the issue is that time is running out to get matters sorted before the first in a series of European elections kicks off in in the Netherlands in March. A second is that the drama has a new character in the form of Donald Trump. There is little evidence that the US president gives a fig about whether Greece gets debt relief but he may have more than a walk-on role because the US is the biggest shareholder at the Fund and has the power to veto any decision it doesn’t like.

Trump has expressed strong – and not exactly positive – views about the European Union in general and Germany in particular. Causing consternation in Brussels, the new American president has said the EU has become a vehicle for German interests. His trade adviser Peter Navarro has accused Germany of being a currency manipulator, using a ”grossly undervalued” euro to run up a massive current account surplus. Navarro’s specific criticism about currency manipulation is wide of the mark. Germany is part of the eurozone and doesn’t always agree with the monetary policy decisions taken by the ECB. The euro’s recent weakness has nothing to do with a deliberate attempt by the Germans to reduce its value and everything to do with the fact that Europe has been loosening monetary policy at a time when the US has started to raise interest rates.

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Europe has long lost whatever -humanitarian- values it had.

Testing Europe’s Values (NYT)

When the European Union and Turkey reached a deal last year to lessen the flow of refugees into Greece, the priority was on defending borders, not the humanitarian crisis. Sadly, that remains Europe’s priority as it turns its attention to halting the flow of people from Libya to Italy. More than 180,000 people crossed the Mediterranean to arrive in Italy last year, and more than 5,000 died on the journey. The European Council met in Malta on Friday with the urgent task of preventing large numbers of people from setting out from Libya for Italy as soon as the weather improves this spring. The problem is twofold: Thousands risk drowning in rickety smugglers’ boats and another wave of migrants risks putting even more pressure on Italy and other European Union members where anti-immigrant populism is on the rise.

While the European Union is assisting in rescuing migrants at sea and in training the Libyan Coast Guard, its priority remains to “ensure effective control of our external border and stem illegal flows into the E.U.” That effectively means leaving people stranded in Libya, where migrants are subject to rape, beatings and torture in overcrowded camps. Europe hopes to enlist the International Organization for Migration and the United Nations’ refugee agency to ensure that migrants in Libya are detained in humane conditions. But these organizations in a joint statement warned that, given the situation in Libya, “it is not appropriate to consider Libya a safe third country, nor to establish extraterritorial processing of asylum seekers in North Africa.” Europe is also investing in improving conditions in Africa that compel people to flee, but that is a long-term solution that does little to address the immediate crisis.

On Wednesday, Libya’s United Nations-backed prime minister, Fayez Serraj, offered to allow NATO or European Union ships to pursue smugglers in Libyan waters. Putting smugglers out of business is important. But if NATO or the European Union sends migrants back to Libya, it “would violate the law, not to mention basic decency, and betray the values on which the E.U. and its member states were built,” said Judith Sunderland, the associate Europe and Central Asia director at Human Rights Watch.

Ahead of the Malta meeting, the European Council president, Donald Tusk, and Malta’s prime minister, Joseph Muscat, warned that, with populism on the rise, the “E.U.’s key values are in danger, if we don’t act now.” But counting on Libya to keep migrants from leaving for Europe also puts those values in danger. The obvious immediate answer to the plight of African migrants is to open more legal channels for people to reach Europe, and to ensure that every member country assumes its fair share of new arrivals so that Italy is not overwhelmed.

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Completely lost.

EU Leaders Back Libyans To Curb New Migrant Wave (R.)

European Union leaders placed a bet on Libya’s fragile government to help them prevent a new wave of African migrants this spring, offering Tripoli more money and other assistance to beef up its frontier controls. Meeting in Malta – in the sea lane to Italy where more than 4,500 people drowned last year – the leaders addressed legal and moral concerns about having Libyan coastguards force people ashore by pledging to improve conditions in migrant camps there. “If the situation stays as is now, in a few weeks we will have a humanitarian crisis and people will start pointing fingers, saying Europe has done nothing,” said Joseph Muscat, the prime minister of Malta, which currently holds the presidency of the bloc. “With this agreement… there is one first decent shot in trying to get a proper management of migration flows across the central Mediterranean.”

Aid groups, however, accused the EU, of abandoning humanitarian values and misrepresenting conditions in Libya, where the U.N.-backed government of Fayez al-Seraj has only a shaky and partial hold on the sprawling desert nation. Medecins Sans Frontieres, which works on the ground, said the summit proved EU leaders were “delusional” about Libya. “Today was not about saving lives; it’s clear that the EU is ready to sacrifice thousands of vulnerable men, women and children in order to stop them reaching European shores.” The chaos in Libya has thwarted any hope of a quick fix in the way that a controversial EU deal with Turkey a year ago led to a virtual halt to a migrant route to Germany via Greece along which more than a million asylum-seekers traveled in 2015.

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How much further must this sink before we call it enough?

Hunger Strikers At Greek Refugee Camp Keep Minister, Police Out (K.)

Migration Minister Yiannis Mouzalas on Monday visited the state-run reception facility for migrants at Elliniko, south of Athens, amid reports that some of the residents have started a hunger strike against substandard conditions but was prevented from entering the site by protests. Dozens of protesting migrants formed a human chain at the entrance to the site, keeping out police and the minister, as child refugees sat on top of a barbed wire fence, shouting at the officers. The minister, who initially arrived at the site alone, was subsequently allowed to enter by migrants keen to discuss their demands. Migrants launched their hunger strike on Monday morning, calling for improved conditions at the site which authorities have pledged to clear soon to allow for a planned real estate project.

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Jan 212017
 
 January 21, 2017  Posted by at 10:57 am Finance Tagged with: , , , , , , , ,  3 Responses »
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Bettmann/Getty Minimum Wage 1963


Trump’s Declaration of War (Paul Craig Roberts)
The Audacity of Trump (WSJ)
Trump Trade Strategy Starts With Quitting TPP – White House (R.)
Trump, in Oval Office, Signs First Order on Obamacare (R.)
Trump Reverses Obama’s Mortgage Fee Cuts on First Day (BBG)
Far-Right Leaders Meet To Discuss ‘Free Europe’ Vision (R.)
As Housing Bubble Pops, Chinese Real Estate Firms Halt Monthly Pricing Data (ZH)
The Curse of Econ 101 (Atlantic)
Economics, Society, And The Environment (EI)
Turkish Parliament Approves Constitutional Reform, Expanded Powers For Erdogan
With New Constitution, Erdogan Eyes For One-Man Rule (GP)
Greek Have Lost Wealth Worth One Year’s GDP Since 2009 (Kath.)

 

 

Who are Trump’s real enemies? There’s no easy answer. PCR concludes: “President Trump has declared a war far more dangerous to himself than if he had declared war against Russia or China.”

Trump’s Declaration of War (Paul Craig Roberts)

President Trump’s brief inaugural speech was a declaration of war against the entirety of the American Ruling Establishment. All of it. Trump made it abundantly clear that Americans’ enemies are right here at home: globalists, neoliberal economists, neoconservatives and other unilateralists accustomed to imposing the US on the world and involving us in endless and expensive wars, politicians who serve the Ruling Establishment rather than the American people, indeed, the entire canopy of private interests that have run America into the ground while getting rich in the process. If truth can be said, President Trump has declared a war far more dangerous to himself than if he had declared war against Russia or China.

The interest groups designated by Trump as The Enemy are well entrenched and accustomed to being in charge. Their powerful networks are still in place. Although there are Republican majorities in the House and Senate, most of those in Congress are answerable to the ruling interest groups that provide their campaign funds and not to the American people or to the President. The military/security complex, offshoring corporations, Wall Street and the banks are not going to roll over for Trump. And neither is the presstitute media, which is owned by the interest groups whose power Trump challenges. Trump made it clear that he stands for every American, black, brown, and white. Little doubt his declaration of inclusiveness will be ignored by the haters on the left who will continue to call him a racist just as the $50 per hour paid protesters are doing as I write.

Indeed, black leadership, for example, is enculturated into the victimization role from which it would be hard for them to escape. How do you pull together people who all their lives have been taught that whites are racists and that they are the victims of racists? Can it be done? I was just on a program briefly with Press TV in which we were supposed to provide analysis of Trump’s inaugural speech. The other commentator was a black American in Washington, DC. Trump’s inclusiveness speech made no impression on him, and the show host was only interested in showing the hired protesters as a way of discrediting America. So many people have an economic interest in speaking in behalf of victims that inclusiveness puts them out of jobs and causes.

So along with the globalists, the CIA, the offshoring corporations, the armaments industries, the NATO establishment in Europe, and foreign politicians accustomed to being well paid for supporting Washington’s interventionist foreign policy, Trump will have arrayed against him the leaders of the victimized peoples, the blacks, the hispanics, the feminists, the illegals, the homosexuals and transgendered. This long list, of course, includes the white liberals as well, as they are convinced that flyover America is the habitat of white racists, misogynists, homophobes, and gun nuts. As far as they are concerned, this 84% of geographical US should be quarantined or interred.

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WSJ licking up to power?

The Audacity of Trump (WSJ)

Donald J. Trump takes the oath of office on Friday facing unprecedented opposition but also an extraordinary opportunity. He confronts the paradox of a country skeptical that he has the personal traits for the Presidency but still hopeful he can fulfill his promise to shake up a government that is increasingly powerful even as it fails to work. In this respect he is the opposite of President Obama, whom Americans admire personally but see as a failure in delivering on his promises. Mr. Trump begins his Presidency without a reservoir of personal goodwill, so more than most Commanders in Chief he will have to win over Americans with results. He will have to do this, moreover, against a political opposition that is blunt and relentless in wanting him to fail. Inaugurations are typically moments of political unity and appeals to larger national purpose, but Mr. Trump will get no honeymoon.

Democratic leaders are calling his election illegitimate, and most of the media wants Mr. Trump to implode—for reasons of partisanship, ideology or simply to vindicate their view during the campaign that he couldn’t and shouldn’t win. No President since Nixon will face a more hostile resistance in the press and permanent bureaucracy. Yet rather than rage against this hostility, Mr. Trump should view it as an opportunity. So many elites expect him to fail that even small early successes will confound them. So many on the left are predicting the rise of fascism that he can make them look foolish by working well with Congress. So many in the media will portray him as the leader of a gang of billionaires that he can turn the tables with an up-from-poverty and education choice campaign.

Mr. Trump owes his narrow election victory to center-right and independent voters who decided he was a risk worth taking. Notably, they seem to be reserving judgment. In the new Wall Street Journal/NBC News poll, Mr. Trump’s personal popularity rating is 10 points underwater, 38% positive, 48% negative—the lowest of any modern President at inauguration. But as notably, the public is better disposed to Mr. Trump’s agenda than to his character and temperament. Tax reform, a faster campaign against Islamic State, improving roads and bridges, and fixing health care enjoy widespread support. If voters are ambivalent about Mr. Trump personally, he has a policy opening to earn their support.

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Hard not to be happy about this.

Trump Trade Strategy Starts With Quitting TPP – White House (R.)

The new U.S. administration of President Donald Trump said on Friday its trade strategy to protect American jobs would start with withdrawal from the 12-nation Trans-Pacific Partnership (TPP) trade pact. A White House statement issued soon after Trump’s inauguration said the United States would also “crack down on those nations that violate trade agreements and harm American workers in the process.” The statement said Trump was committed to renegotiating another trade deal, NAFTA, which was signed in 1994 by the United States, Canada and Mexico. “For too long, Americans have been forced to accept trade deals that put the interests of insiders and the Washington elite over the hard-working men and women of this country,” it said.

“As a result, blue-collar towns and cities have watched their factories close and good-paying jobs move overseas, while Americans face a mounting trade deficit and a devastated manufacturing base.” The statement said “tough and fair agreements” on trade could be used to grow the U.S. economy and return millions of jobs to America. “This strategy starts by withdrawing from the Trans-Pacific Partnership and making certain that any new trade deals are in the interests of American workers.” If NAFTA partners refused to give American workers a fair deal in a renegotiated agreement, “the President will give notice of the United States’ intent to withdraw from NAFTA,” the statement added.

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Better get a replacement fast. You don’t want stories of people dying due to lack of access to health care, in your first weeks or months.

Trump, in Oval Office, Signs First Order on Obamacare (R.)

President Donald Trump directed government agencies on Friday to freeze regulations and take steps to weaken Obamacare, using his first hours in the White House to make good on a campaign promise to start dismantling his predecessor’s healthcare law. Heading into the Oval Office shortly after the conclusion of his inaugural parade, Trump signed an order on the Affordable Care Act that urged government departments to “waive, defer, grant exemptions from, or delay the implementation” of provisions that imposed fiscal burdens on states, companies or individuals. It also called for efforts to give states greater flexibility in implementing healthcare programs while developing “a free and open market in interstate commerce for the offering of healthcare services and health insurance.”

Health experts had speculated that Trump could expand exemptions from the so-called individual mandate, which requires Americans to carry insurance or face a penalty, or the requirement that employers offer coverage. Experts also believe the administration could try to reduce the “essential benefits,” such as maternity care and mental health services, that insurance plans must cover. The White House did not provide further details about the executive order. Trump’s spokesman Sean Spicer said the White House also directed an immediate regulatory freeze for all government agencies in a memo from Trump’s chief of staff, Reince Priebus. He did not offer details. Repealing and replacing the Affordable Care Act, one of former President Barack Obama’s signature laws, was a central pledge for Trump during the presidential election campaign.

Republicans in the U.S. Congress have not yet laid out a plan to recast the insurance program. In a hastily arranged ceremony, surrounded by some of his aides, Trump sat behind the presidential Resolute Desk and signed the order. He also signed commissions for his newly confirmed defense secretary, James Mattis, and his homeland security secretary, John Kelly. Trump spoke briefly about his day with reporters. “It was busy, but good. It was a beautiful day,” he said. Vice President Mike Pence then swore in Mattis and Kelly in a separate ceremony. There were other signs of change in the Oval Office, which Obama vacated on Friday morning. Golden drapes hung where crimson ones had earlier in the day and new furniture dotted the room.

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The entire US housing system is such a mess it’s hard to know where to begin. Whatever happens, it will be painful.

Trump Reverses Obama’s Mortgage Fee Cuts on First Day (BBG)

Soon after Donald Trump was sworn in as president, his administration undid one of Barack Obama’s last-minute economic-policy actions: a mortgage-fee cut under a government program that’s popular with first-time home buyers and low-income borrowers. The new administration on Friday said it’s canceling a reduction in the Federal Housing Administration’s annual fee for most borrowers. The cut would have reduced the annual premium for someone borrowing $200,000 by $500 in the first year. The reversal comes after Trump’s team criticized the Obama administration for adopting new policies as it prepared to leave office. In the waning days of the administration, the White House announced new Russia sanctions, a ban on drilling in parts of the Arctic and many other regulations.

Last week, Obama’s Housing and Urban Development secretary, Julian Castro, said the FHA would cut its fees. The administration didn’t consult Trump’s team before the announcement. Republicans have argued in the past that reductions put taxpayers at risk by lowering the funds the FHA has to deal with mortgage defaults. [..] A letter Friday from HUD to lenders and others in the real-estate industry said, “more analysis and research are deemed necessary to assess future adjustments while also considering potential market conditions in an ever-changing global economy that could impact our efforts.” Senate Democratic leader Chuck Schumer of New York took to the chamber’s floor to denounce the reversal. “It took only an hour after his positive words on the inaugural platform for his actions to ring hollow,” Schumer said. “One hour after talking about helping working people and ending the cabal in Washington that hurts people, he signs a regulation that makes it more expensive for new homeowners to buy mortgages.”

Mark Calabria, director of financial regulation studies for the libertarian Cato Institute, said it was appropriate for the administration to examine last-minute decisions by its predecessor, “especially when those decisions appear to be purely motivated by politics.” Ben Carson, Trump’s nominee to lead HUD, FHA’s parent agency, said at his confirmation hearing last week that he was disappointed the cut was announced in Obama’s final days in office. The FHA sells insurance to protect against defaults and doesn’t issue mortgages. It is a popular program among first-time home buyers because it allows borrowers to make a down payment of as low as 3.5% with a credit score of 580, on a scale of 300 to 850. The Obama administration announced last week it would cut the insurance premium by a quarter of a %age point to 0.60%, effective on Jan. 27.

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The products of a failed consensus system. Or in other words: “While you were sleeping”. Obama’s last phone call from the White House was to Merkel, not a coincidence.

Far-Right Leaders Meet To Discuss ‘Free Europe’ Vision (R.)

Far-right populist leaders from Germany, France, Italy and the Netherlands meet in the German city of Koblenz on Saturday to present their vision for “a free Europe” that would dismantle the European Union. Marine Le Pen, who is expected to make it into a May 7 second-round run-off for the French presidency, is due to speak at the meeting, along with Frauke Petry of the anti-immigration Alternative for Germany (AfD). They will be joined by Geert Wilders, leader of the Dutch far-right Freedom Party (PVV) who was last month convicted of discrimination against Moroccans, and Matteo Salvini of the Northern League who wants to take Italy out of the euro. Emboldened by Britons’ vote last year to leave the European Union, the leaders are meeting under the slogan “Freedom for Europe” and aim to strengthen ties between their like-minded parties, whose nationalist tendencies have hampered close collaboration in the past.

“This gives us an opportunity to see how we stand with other European parties,” a spokeswoman for Salvini said. Le Pen told France’s Radio Classique that the meeting was proof that her party was not isolated. “It is therefore the revolution of the people that we are taking part in. It is obviously very important to show that the cooperative Europe we want to achieve (is reflected) in our cooperation,” she said. Several leading German media have been barred from the meeting, which is being organized by the Europe of Nations and Freedom (ENF), the smallest group in the European Parliament, in a year when the parties are hoping for electoral breakthroughs. Populist anti-immigration parties are on the rise across Europe as high unemployment and austerity, the arrival of record numbers of refugees and militant attacks in France, Belgium and Germany feed voter disillusionment with traditional parties.

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“Judged by current conditions, we won’t publish it in the future..”

As Housing Bubble Pops, Chinese Real Estate Firms Halt Monthly Pricing Data (ZH)

That didn’t take long. Earlier this week we reported that after 19 straight months of continued acceleration in home prices, China’s latest housing bubble may have finally burst (again) after December prices in the 70 cities tracked by the NBS, rose by 12.7%, below the 12.9% annual growth rate in the previous month – the first annual decline in nearly 2 years. Fast forward to Friday, when at least two major Chinese private providers of home price data stopped publishing the figures, just as the housing market is stating to cool off at a dramatic pace across all Tier cities. According to Reuters, the China Index Academy, a unit of U.S.-listed Fang Holdings, has stopped distributing monthly housing price index data for 100 cities that it usually issued at the start of the month. The academy said it had suspended distribution indefinitely, without giving a reason for the suspension.

“I don’t know who exactly is making the order, and it’s not mandatory,” said a source with knowledge of the matter, who declined to be identified as the topic is a sensitive one. Home price data from private providers tends to show sharper increases than official data from the National Bureau of Statistics (NBS), which publishes monthly and annual %age changes in 70 major cities. It also overextends on the downside, which according to official data, has now begun, and may explain the self-imposed censorship. Since last summer, in an attempt to cool the overheating housing market, China’s government had levied curbs on buying and ownership to rein in soaring prices and limit asset bubble risks. E-house China, another influential private real estate consultancy also indefinitely suspended its monthly housing price index for 288 cities.

“Judged by current conditions, we won’t publish it in the future,” said Cherilyn Tsui, a public relations officer at CRIC, the consultancy’s real estate research branch. “We stopped distributing prices data a few months ago. At first it was just no external distribution, but now even internally we don’t distribute any more,” she told Reuters. While Tsui said she did not know the reason for the halt, she added that data on sales volumes and inventories would still be published. “Housing prices are an extremely sensitive matter right now,” a second source with knowledge of the matter told Reuters. Perhaps the reason is that having created a massive bubble to the upside, Beijing is hoping to delay the descent in prices in order to attain a smooth landing at a time when China is already faced with record capital outflows, a plunging currency and all time high levels of debt.

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Treating people like tradable resources is always a bad idea.

The Curse of Econ 101 (Atlantic)

In a rich, post-industrial society, where most people walk around with supercomputers in their pockets and a person can have virtually anything delivered to his or her doorstep overnight, it seems wrong that people who work should have to live in poverty. Yet in America, there are more than ten million members of the working poor: people in the workforce whose household income is below the poverty line. Looking around, it isn’t hard to understand why. The two most common occupations in the United States are retail salesperson and cashier. Eight million people have one of those two jobs, which typically pay about $9–$10 per hour. It’s hard to make ends meet on such meager wages. A few years ago, McDonald’s was embarrassed by the revelation that its internal help line was recommending that even a full-time restaurant employee apply for various forms of public assistance.

Poverty in the midst of plenty exists because many working people simply don’t make very much money. This is possible because the minimum wage that businesses must pay is low: only $7.25 per hour in the United States in 2016 (although it is higher in some states and cities). At that rate, a person working full-time for a whole year, with no vacations or holidays, earns about $15,000—which is below the poverty line for a family of two, let alone a family of four. A minimum-wage employee is poor enough to qualify for food stamps and, in most states, Medicaid. Adjusted for inflation, the federal minimum is roughly the same as in the 1960s and 1970s, despite significant increases in average living standards over that period. The United States currently has the lowest minimum wage, as a proportion of its average wage, of any advanced economy, contributing to today’s soaring levels of inequality. At first glance, it seems that raising the minimum wage would be a good way to combat poverty.

The argument against increasing the minimum wage often relies on what I call “economism”—the misleading application of basic lessons from Economics 101 to real-world problems, creating the illusion of consensus and reducing a complex topic to a simple, open-and-shut case. According to economism, a pair of supply and demand curves proves that a minimum wage increases unemployment and hurts exactly the low-wage workers it is supposed to help. The argument goes like this: Low-skilled labor is bought and sold in a market, just like any good or service, and its price should be set by supply and demand. A minimum wage, however, upsets this happy equilibrium because it sets a price floor in the market for labor. If it is below the natural wage rate, then nothing changes. But if the minimum (say, $7.25 an hour) is above the natural wage (say, $6 per hour), it distorts the market. More people want jobs at $7.25 than at $6, but companies want to hire fewer employees. The result: more unemployment.

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I could write a lot about this. For now let’s just say that the lack of virtually any discussion of energy shows just how poor a field economics is. One other thing: one must at least bring to the table that the 2nd law of thermodynamics contradicts the very term ‘sustainable’.

Economics, Society, And The Environment (EI)

A common view of some is that the relationship between economics and the environment is that environmental considerations are “externalities” for economic systems. In other words, effects produced by economic activity in the environment result from a limited overlap between the economic “system” and the environment, such as the diagram shown (from Giddings, Hopewood and O’Brien): The diagram above is adopted by some to describe the fields of enivonmental economics and environmental science. EnviromentalScience.org describes their discipline: “Environmental economics is an area of economics dealing with the relationship between the economy and the environment. Environmental economists study the economics of natural resources from both sides – their extraction and use, and the waste products returned to the environment. They also study how economic incentives hurt or help the environment, and how they can be used to create sustainable policies and environmental solutions.”

This seems a resonable description. But the accompanying diagram indicates a lack of understanding of the scope of the field. Giddings, Hopewood and O’Brien point out the logical shortcomings of the traditional concept above, and suggest a more correct way of conceptualizing the relationships: “A more accurate presentation of the relationship between society, economy and environment than the usual three rings is of the economy nested within society, which in turn is nested within the environment (Figure 2). Placing the economy in the centre does not mean that it should be seen as the hub around which the other sectors and activities revolve. Rather it is a subset of the others and is dependent upon them. Human society depends on environment although in contrast the environment would continue without society (Lovelock, 1988). The economy depends on society and the environment although society for many people did and still does (although under siege) exist without the economy.”

The importance of recognizing that all of society is a subset of functions within the environment is that society cannot violate the proven physical laws of the physical world (actually universe, but we will return to that thought later). Likewise, the economy exists totally within society so economics must also obey the same physical laws. Steve Keen has argued that the forgotten parameter in economics is energy. Whereas economists develop models and theories based on labor and capital as the components of production, energy should also be explicitly defined as separate and co-variant with labor and capital. Keen argues that failure to do so has led economists to propose models and theories which violate the fundamental laws of our environment, the Laws of Thermodynamics.

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This will not end well.

Turkish Parliament Approves Constitutional Reform, Expanded Powers For Erdogan

In a night-long session, lawmakers voted in favor of a set of amendments presented by the ruling Justice and Development Party (AKP), which was founded by current President Recep Tayyip Erdogan in 2003. The reform bill is designed to widen Erdogan’s powers, who presently only occupies a largely ceremonial role. The bill cleared the minimum parliamentary threshold necessary to put the measures to a national referendum for final approval, which could be held as early as in the spring. The vote took place with 488 lawmakers out of the 550-seat assembly in attendance. A total of 339 parliamentarians voted in favor of the motion and 142 against it, while five cast empty ballots and two of the votes were ruled out as invalid.

The measure required at least 330 votes to be approved and be put forward to a plebiscite. Some of the lawmakers not attending the vote were absent on account of remaining in detention; as part of a wide-ranging purge on dissidents Turkey has detained opposition HDP politicians, whom it accuses of having ties to the outlawed Kurdistan Workers’ Party (PKK). Turkish Prime Minister Binali Yildirim celebrated the result saying “we are now entrusting this to the people, its actual owners. Now it’s the people’s word. It is the people’s decision.” Critics, however, say the amendments will weaken checks and balances in Turkey’s democracy, leading to too much power being consolidated in the office of the president.

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More detail; looks Google translated, but may just be poorly written.

With New Constitution, Erdogan Eyes For One-Man Rule (GP)

The Turkish Republic is on the throes of a radical transformation, even regime change, as Parliament completed 2nd round of voting 18-article constitutional reform bill, which gives expanded powers to President Recep Tayyip Erdogan in a way that removes last vestiges of separation of powers. While the world watch inauguration ceremony of U.S. President Donald J. Trump, Turkish Parliament paved way for a referendum to significantly expand powers of Mr. Erdogan, the president’s long-held political ambition. The breathtaking speed of the first round vote was a clear-cut indication of a strong will on behalf of government and its ardent backer, opposition Nationalist Movement Party (MHP) to quickly push through the controversial package.

The vote reflected the emergence of a new alignment in the Turkish political landscape, formation of an Islamist-nationalist front that harbor similar views on a number of political issues concerning the fate of the country. While the first round of voting was a scene of brawls among men, the 2nd round was women’s turn. The fighting among differing factions in Parliament reflected the deep divide the voting created in the society, with critics blasting the government for transforming the country’s regime from a parliamentary democracy into a the rule of a strongman. Aylin Nazliaka, an independent lawmaker, handcuffed herself to the rostrum to protest the voting, prompting a scuffle that hospitalized several female lawmakers. What constitutional bill brings to Turkey is at the core of ensuing debates amid ongoing emergency rule that rendered free discussion of the proposed changes in public sphere near impossible.

While dozens of national TV channels live aired Mr. Erdogan’s address to village administrators in the presidential palace a few days ago, almost no TV station broadcasted the parliamentary session where lawmakers squabbling over momentous decisions that have the power of shattering roots of the republic’s established system. A CHP lawmaker set his own “studio” in Parliament to bypass the censorship. For supporters of the bill, the shift to executive presidency long sought by President Erdogan will provide a bulwark against return to fragile coalition governments of the past. But for the critics of the proposal, it will cement Erdogan’s power and turn Turkey into a dictatorship with scrapping checks and balances, regarded as central pillars of any democratic system. Main opposition CHP says the new scheme will create one-man dictatorship.

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Not sure that reporting “data show that the net wealth per adult Greek inhabitant amounted to €114,000 in 2009” helps. Let alone that it’s correct.

Greek Have Lost Wealth Worth One Year’s GDP Since 2009 (Kath.)

The wealth of Greeks shrank by €167 billion during the years of the financial crisis – i.e. almost one year’s GDP – according to a survey by Credit Suisse included in the weekly bulletin of the Hellenic Federation of Enterprises (SEV). The Swiss bank estimates the net wealth of Greeks – that is with their loans deducted – at €856 billion, against €1,023 billion in 2009, just before the country entered the bailout process.The data show that the net wealth per adult Greek inhabitant amounted to €114,000 in 2009, while in the rest of Europe it came to €93,000 per adult inhabitant. According to SEV, what puts Greece in a different category to the rest of Europe is the excessive borrowing.

SEV stresses that what is not obvious in the data on the fortune of Greek people and is not sufficiently presented is the huge deficits of the local social security system that will continue to absorb considerable resources in the future, putting a lid on the country’s growth unless tackled sufficiently. In practice, the older generations have not just borrowed from the savings of fellow Europeans, but also from the future savings of their children.

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Nov 302016
 
 November 30, 2016  Posted by at 11:06 am Finance Tagged with: , , , , , , , , , ,  6 Responses »
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Wyland Stanley Bulletin press car: Mitchell auto at Yosemite National Park 1920


OK, I get it: Companies Clamor for Cheap Labor, Fed Delivers (WS)
Trump Notches a Win as Carrier Agrees to Keep 1,000 Jobs in U.S.
Asia Is About to Face a Significant Dollar Stress Test (BBG)
Property Bubble ‘Most Important Macro Issue In China’ – Deutsche (BI)
China’s Foreign Investment ‘Shopping Spree’ Over?! (SCMP)
RBS Fails Bank Of England Stress Test (Ind.)
UK Shoppers ‘Resolutely Gloomy’ About The Future Of The Economy (Ind.)
The ‘Washington Post’ ‘Blacklist’ Story Is Shameful and Disgusting (Taibbi)
US Intelligence Experts Urge Obama To End Snowden’s ‘Untenable Exile’ (G.)
The End Of Empires: Rome Vs. America (SHTFP)
The Rediscovery of Men (Jim Kunstler)
Major Global Firms Buy Indonesia Palm Oil Produced By Child Labor (R.)
North Dakota Moves To Block Supplies From Reaching Pipeline Protesters (R.)
The Areas America Could Abandon First (BBG)
Turkey Has Secret Plan To Send 3,000 Refugees To Greece Every Day (Ind.)

 

 

Makes it easier to bring jobs back home, too.

OK, I get it: Companies Clamor for Cheap Labor, Fed Delivers (WS)

Despite all the frothy excitement about the stock market’s new highs, and the drooling today over the new highs reached by Housing Bubble 2, exceeding the prior crazy highs of Housing Bubble 1 even according to the Case-Shiller Index, and despite eight years of super-low interest rates, and a million other things that are hyped constantly, median household incomes, the crux of the real economy, is still a dreary affair. Sentier Research released its median household income measure for October today. Adjusted for inflation, it edged up 0.6% from a year ago to $57,929. But it’s down 1.3% from January 2008, and it’s down 1.5% from its peak in 2002. It has fallen 0.5% since January. That’s not a propitious trend. The report put it this way: “Median annual household income in 2016 has not been able to maintain the momentum that it achieved during 2015.” This chart by Doug Short shows the stagnating inflation-adjusted debacle (blue line) and the nominal income (red line):

[..] Even minuscule but consistent understatement of CPI in relationship to actual price changes as experienced by the median household wreaks havoc on their inflation-adjusted income. Since 2000, official inflation has amounted to 42%. If CPI is understated by just a fraction every year, multiplied by 16 years, it would knock several%age points off real median household income. This translates into reduced purchasing power, which is exactly what many people have been experiencing. This whole affair – the devious impact of inflation on household income – becomes even clearer in this chart by Doug Short at Advisor Perspectives. It shows the% change over time, starting in 2000: The beautifully soaring illusion of nominal income (red line), and the dreary reality of wage stagnation or worse, after inflation (blue line):

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Not even a rounding error, but it gets more headlines than jobs are saved.

Trump Notches a Win as Carrier Agrees to Keep 1,000 Jobs in U.S.

Carrier agreed to keep about 1,000 jobs at an Indiana factory that had been set to move to Mexico, marking a victory for President-elect Donald Trump on an issue that had become a rallying cry during his campaign. “We are pleased to have reached a deal” with Trump and Vice President-elect Mike Pence to keep the work in the U.S., Carrier said Tuesday in a tweet. Trump tweeted that he’ll travel to Indiana on Thursday to make the announcement. Carrier said earlier this year it would move the furnace plant’s operations, eliminating 1,400 U.S. jobs, to keep production costs competitive.

The decision garnered national notice after a worker’s cell-phone video of the announcement to employees took off on social media and generated criticism of Carrier parent United Technologies, which is also a major defense contractor that supplies engines for U.S. fighter jets. Trump, as well as Democratic U.S. Senator Bernie Sanders, seized on the announcement and used the company in their presidential campaigns as an example of how U.S. workers were being hurt by trade deals. In April, Trump said he would impose a hefty tax on Carrier’s Mexican-made products and “within 24 hours, they’re going to call back: ‘Mr. President, we’ve decided to stay. We’re coming back to Indianapolis.’”

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When the reserve currency stops flowing, beware.

Asia Is About to Face a Significant Dollar Stress Test (BBG)

For Asian markets, 2017 could be the year of the dollar crunch. Foreign portfolio flows have taken a sharp downturn since Donald Trump’s election victory, with $15 billion fleeing Asian bonds and stocks this month alone — close to 30% of year-to-date inflows to the region, according to Deutsche Bank — as a strengthening greenback and a bevy of protectionist policies from the president-elect darken the growth prospects for emerging markets. Lending spreads, domestic demand and the resolve of domestic central banks to offset liquidity shortages will be tested next year, analysts warn, as key sources of dollar flows to the region trade and portfolio inflows may unravel if Trump makes good on his key campaign proposals.

A slew of investment banks this week, including Deutsche Bank, Citigroup, Morgan Stanley and Societe Generale, reckon the pain for emerging markets will intensify in 2017, citing, in part, the rising cost of servicing dollar debts amid a strengthening greenback relative to local currencies, and higher Fed policy rates. “The [debt-servicing] challenge looks even fiercer for non-US borrowers who have borrowed in dollars — dollar strength will make it harder to repay the debt,” SocGen analysts, led by Brigitte Richard-Hidden, wrote in a report on Tuesday. “There are plenty of them, as the outstanding dollar-denominated credit to the rest of the world has more than doubled over the past 10 years to nearly $10 trillion,” analysts at the French bank conclude. “EM countries and corporations in particular have been keen on borrowing in dollars ([to the tune of] $3.2 trillion).”

At the heart of the challenge, according to analysts: a tighter U.S. trade position with the region in the coming years, which would shrink the pool of dollars floating overseas and make it harder for emerging markets to settle cross-border trade and service hard-currency debts. “Each of these sources of dollars – whether from trade, portfolio flows or debt issuance – could be at risk in the new post-election regime,” Deutsche Bank strategists, led by Mallika Sachdeva, wrote in a research note on Monday. “This could mean a reduction in trade surpluses in the region: exports could suffer from protectionist efforts.”

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Much of the world is a Chinese property bubble, especially major cities.

Property Bubble ‘Most Important Macro Issue In China’ – Deutsche (BI)

China’s debt-fuelled property boom, and potential bust, will be one of the biggest issues facing the country’s policymakers in 2017, according to Deutsche Bank. Deutsche Bank economists, led by Zhiwei Zhang and Li Zeng, said the real estate bubble is “the most important macro issue in China,” in a note to clients. They point to rapid hikes in land sales and auction prices, as well as mounting debt levels, as needing attention. Land sales accounted for more than a third of local government revenue, Deutsche Bank said, and mortgages made up 43% of all new loans issued in renminbi. The difference between the starting price and final price in land auctions continues to rise rapidly and “this shows some developers continue to expect sharp property price inflation to come,” the analysts said. Here’s the chart:

And here’s the debt chart showing sharp increases for this year:

“Chinese policymakers are aware the market risks overheating and will act accordingly.” “In the next few months we believe the government will put further pressure on developers by tightening broad credit growth,” Zhang and Zeng said. “Property sales and investment growth will likely slow further in 2017Q1. Local government land revenue may weaken by 2017Q2.” On Monday analysts at Morgan Stanley raised the alarm about increased household borrowing, led by mortgages, in a note to clients. China’s debt to GDP rose to 276% in the third quarter this year from 249% in 2015. “This has been mainly driven by a rapid rise in new mortgages from RMB 1.7 trillion in 2014 to RMB 4.6 trillion in the past 12 months,” according to a note circulated to clients. With the debt overhang growing, the economic benefits of borrowing more are shrinking. It took nearly eight units of debt to produce one unit of GDP growth in 2016, compared with around four in 2014.

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Want to bet?

China’s Foreign Investment ‘Shopping Spree’ Over?! (SCMP)

The central government is embarking on a massive policy shift designed stem capital outflow by curbing mainland China’s outbound investment, sources informed of official instructions have told the South China Morning Post. Tighter control of outbound investment is likely to put an end to a trophy asset shopping spree by well-connected companies such as Anbang Insurance and Dalian Wanda, with Beijing is ready to cut the supply of foreign exchange for such deals. Shanghai’s municipal foreign exchange authority had told bank managers in the city that all overseas payments under the capital account bigger than US$5 million would have to be submitted to Beijing for special clearance before proceeding, the sources said. China’s central bank talks up the yuan against US dollar ‘uncertainties’

While the move did not necessarily mean all such deals would be vetoed, the regulatory procedures that would have to be navigated before completing them would take much longer, the sources said. A separate document seen by the Post, said to be the minutes of a central bank meeting on cross-border capital controls, said that from September next year Beijing would ban deals involving investment of more than US$10 billion, mergers and acquisitions valued at more than US$1 billion outside a Chinese investor’s core business, and foreign real estate deals by state-owned enterprises involving more than US$1 billion. [..] Mainland China’s foreign exchange reserves have fallen by US$873 billion since hitting an all-time high of US$3.99 trillion in June 2014. The reserves fell by US$46 billion last month, the largest monthly fall since January, but that understates the size of mainland China’s capital flight because residents are also moving yuan assets abroad.

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It’ll be allowed to blunder on. TBTF.

RBS Fails Bank Of England Stress Test (Ind.)

The Royal Bank of Scotland (RBS) has failed key hurdles in a Bank of England stress test, forcing the lender to draw up new plans in case of a financial crisis. The toughest stress test yet assessed how the UK’s seven biggest lenders would cope with hypothetical scenarios including a recession, a housing crash and a halving of the oil price. RBS, which is still 73% owned by the government after its bailout in 2008, has emerged as the worst hit in the annual health check of the banking system. This means the lender must take action to protect itself against a sharp slump in the economy. RBS has issued a plan intended to bolster its financial strength by an estimated £2bn, which has been accepted by the BoE.

The bank has also reduced its “risky” assets by £10.4bn or 21% to £38.6bn. Ewen Stevenson, RBS chief financial officer, said the bank is committed to creating a “stronger, simpler and safer” bank for their customers and their shareholders. He said: “We have taken further important steps in 2016 to enhance our capital strength, but we recognise that we have more to do to restore the bank’s stress resilience including resolving outstanding legacy issues.” Barclays and Standard Chartered also struggled under the test, however neither was required to submit a revised capital plan. The test also covered HSBC, Lloyds Banking Group, Santander and Nationwide.They did not reveal any capital inadequacies in the test, the BoE said.

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“the big theme is the reduced confidence in the UK economy looking back and ahead..”

UK Shoppers ‘Resolutely Gloomy’ About The Future Of The Economy (Ind.)

Shoppers are now “resolutely gloomy” about the country’s economic future and are putting off big purchases as uncertainty mounts, according to a respected survey. The GfK Consumer Confidence Barometer, which surveys 2,000 people, recorded a measure of –22 for confidence in the economy over the next year, down from -17 in October and –9 in September. A negative number means more people think things will get worse than vice versa. Major purchases took the biggest hit according to the report, with the index falling 9 points from 14 in October to 5 in November. People’s view of their personal financial situation over the next twelve months also fell. However, both measures are above their respective post-referendum nadirs.

Spending has so far kept up as buyers stock up on Christmas gifts but the prospect of sharply increasing prices, stagnant wages and further uncertainty over access to the UK’s single market have all weighed heavily on shoppers’ expectations over the past month. Earlier in November, the Bank of England made a dramatic rise to its inflation forecast, predicting it will almost triple from 1% to 2.7% in 2017 as the effects of a weakened pound are felt. National Institute for Economic and Social Research was even more pessimistic, saying it expected inflation to quadruple to about 4% in the second half of next year. Joe Staton, Head of Market Dynamics at GfK, said, “the big theme is the reduced confidence in the UK economy looking back and ahead. We are viewing our economy over the past 12 months with increasing despondency.” Staton said that “despite strong GDP numbers”, shoppers are “resolutely gloomy about the outlook” for the economy.

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Me, I’m wondering where we are when everyone feels compelled to comment on such obvious nonsense. This morning when going through the news I kept on seeing photos of Trump and Romney having dinner. What’s the news? What’s the value? Don’t these people have more important things to do than to report on that?

The ‘Washington Post’ ‘Blacklist’ Story Is Shameful and Disgusting (Taibbi)

Last week, a technology reporter for the Washington Post named Craig Timberg ran an incredible story. It has no analog that I can think of in modern times. Headlined “Russian propaganda effort helped spread ‘fake news’ during election, experts say,” the piece promotes the work of a shadowy group that smears some 200 alternative news outlets as either knowing or unwitting agents of a foreign power, including popular sites like Truthdig and Naked Capitalism. The thrust of Timberg’s astonishingly lazy report is that a Russian intelligence operation of some kind was behind the publication of a “hurricane” of false news reports during the election season, in particular stories harmful to Hillary Clinton. The piece referenced those 200 websites as “routine peddlers of Russian propaganda.”

The piece relied on what it claimed were “two teams of independent researchers,” but the citing of a report by the longtime anticommunist Foreign Policy Research Institute was really window dressing. The meat of the story relied on a report by unnamed analysts from a single mysterious “organization” called PropOrNot – we don’t know if it’s one person or, as it claims, over 30 – a “group” that seems to have been in existence for just a few months. It was PropOrNot’s report that identified what it calls “the list” of 200 offending sites. Outlets as diverse as AntiWar.com, LewRockwell.com and the Ron Paul Institute were described as either knowingly directed by Russian intelligence, or “useful idiots” who unwittingly did the bidding of foreign masters.

Forget that the Post offered no information about the “PropOrNot” group beyond that they were “a collection of researchers with foreign policy, military and technology backgrounds.” Forget also that the group offered zero concrete evidence of coordination with Russian intelligence agencies, even offering this remarkable disclaimer about its analytic methods: “Please note that our criteria are behavioral. … For purposes of this definition it does not matter … whether they even knew they were echoing Russian propaganda at any particular point: If they meet these criteria, they are at the very least acting as bona-fide ‘useful idiots’ of the Russian intelligence services, and are worthy of further scrutiny.”

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How long would he remain alive though?

US Intelligence Experts Urge Obama To End Snowden’s ‘Untenable Exile’ (G.)

The campaign to persuade Barack Obama to allow the NSA whistleblower Edward Snowden to return home to the US without facing prolonged prison time has received powerful new backing from some of the most experienced intelligence experts in the country. Fifteen former staff members of the Church committee, the 1970s congressional investigation into illegal activity by the CIA and other intelligence agencies, have written jointly to Obama calling on him to end Snowden’s “untenable exile in Russia, which benefits nobody”. Over eight pages of tightly worded argument, they remind the president of the positive debate that Snowden’s disclosures sparked – prompting one of the few examples of truly bipartisan legislative change in recent years.

They also remind Obama of the long record of leniency that has been shown by his own and previous administrations towards those who have broken secrecy laws. They even recall how their own Church committee revealed that six US presidents, from Franklin Roosevelt to Richard Nixon, were guilty of abusing secret powers. “There is no question that Snowden broke the law. But previous cases in which others violated the same law suggest leniency. And most importantly, Snowden’s actions were not for personal benefit, but were intended to spur reform. And they did so,” the signatories write. The Church committee, or the US Senate select committee to study government operations with respect to intelligence activities, to give it its full name, sat in 1975-76 at a time of deep public anxiety about the rogue work of federal agencies.

The aftershocks of Watergate were still being felt, and Seymour Hersh had exposed in the New York Times mass illegal activities by the CIA, including routine surveillance of anti-war groups. As the 15 staff members point out, the committee investigation led to the disclosure of jaw-dropping illegal acts including the planting of an FBI informant inside the civil rights group the NAACP, attempts to push Martin Luther King into killing himself, and Cointelpro, the vast program run secretly by the FBI to disrupt progressive organisations in the US.

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Great little history lesson. Whether or not to agree with the assumptions behind it is another matter.

The End Of Empires: Rome Vs. America (SHTFP)

The year was 451, and the battle of Chalons (also known as Catalaunian Fields and Campus Martius) was fought between a coalition of Roman legionnaires, Germanic Visigoths, and Gauls against the Huns. Flavius Aetius was the Roman commanding general, and he led his forces to defeat Attila, king of the Huns and commander of the Hun armies. The loss caused Attila to withdraw and skirmish into Italy, but again (this time through diplomacy and concessions) he withdrew in 452, returning into what is now modern Hungary. Attila died in 453, and the Hun menace to Europe had ended. Aetius had been the declining (and fragmented) Western Roman Empire’s best chance to restructure itself. He had fought in Gaul and throughout Italy and Europe for decades, sometimes even with support from the Huns before Attila began his quest for empire.

A master strategist, tactician, diplomat, and warrior, he effectively stemmed the collapse of the Western Roman Empire for another 25 years. In all probability, he may have been able to turn things around for a longer period of time. This was not to be, as he was assassinated by none other than the Emperor Valentinian III and his henchman Heraclius on 22 September 454. The emperor killed the very man who had protected and assured his throne, and worse: now there was no true strategist to take the reins of military command. The last great Roman general was no more, and the Western Roman Empire continued to decline and fragment. [..] Less than 25 years after the battle of Chalons had given it a fighting chance, the Western Roman Empire was no more. [..]And here we are, as history repeats itself, in the last days of the American Empire.

Now ready to assume the Purple and ascend to the seat of power, Donald Trump is going to command and lead (we hope). The campaigns for the midterm elections will begin in November of 2017, therefore Trump has less than one year to begin to reverse the devastation wrought by two consecutive Obama terms that have, in eight years, placed the country on its deathbed and measured it for burial. In a four-year term of office, Donald Trump has to do the job that Aetius did for Rome in two decades, with the last year of that term being wasted on the primary focus of his reelection. What is the difference between Rome and America? A vast geographical area, influxes of alien migrants, an economy that is faltering, a military less than at its best, immorality, vice, and corruption at every turn, societal degradation and a welfare state, and foreign nations ready to pounce characterize both empires.

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“Hillary Clinton’s campaign was engineered from the get-go to complete the demolition of American manhood..”

The Rediscovery of Men (Jim Kunstler)

Donald Trump was about as far from my sense of the male ideal as anything short of the Golem. His accomplishments in life — developing hotels that look like bowling trophies and producing moronic TV shows — seem as flimsy as the plastic golden heraldry plastered on his casinos. His knowledge of the world appears to be on the level of a fifth grader. He can barely string together two coherent sentences off-teleprompter. I was as astonished as anyone by the disclosure of his “grab them by the pussy” courtship advice to little Billy Bush. In my experience, it seemed a very poor strategy for scoring some action, to say the least. In a better world — perhaps even the America he imagines to have been great once — Donald Trump would be a kind of freak among men, a joke, a parody of masculinity.

But then consider the freak show that American culture has become in our time and it shouldn’t be surprising that a cartoon nation has ended up with a cartoon of a man as head-of-state. In fact, I doubt that there even is any remaining collective idea of what it means to be a man here in terms of the ancient virtues. Honor? Dignity? Patience? Prudence? Fuhgeddabowdit. The cultural memory of all that has been erased. The apotheosis of Trump may remind a few people of all that has been lost, but we’re starting from nearly zero in the recovery of it. Consider also the caliber of the male persons who stepped into the arena last spring when the election spectacle kicked off. Only Bernie Sanders came close to representing honorable manhood — in the form of your irascible old “socialist” uncle from Brooklyn — while the rest of them acted like Elmer Fudd, Mighty Mouse, and Woody Woodpecker. And then when the primary elections ended, Bernie drove a wooden stake into his own heart in a bizarre act of political hara-kiri.

Hillary Clinton’s campaign was engineered from the get-go to complete the demolition of American manhood in what turned out to be a reckless miscalculation. “I’m with her (and against him).” Too much in recent American history has been against “him” and a great many of the hims out there began to notice that they were being squeezed out of the nation’s life like watermelon seeds. Most particularly, men were no longer considered necessary in whatever remained of the family unit. This went against the truth of the matter, of course, because nothing has been more harmful to everyday life than the absence of fathers. And this was connected to the secondary calamity of men losing their roles in the workplace — and the loss of self-respect connected with that. So the election awakened some sleeping notion that life was wildly out of balance in America. And being so out of balance, it swung wildly in the other direction.

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All major food firms are involved. Shun all products that contain palm oil. It’s incredibly damaging in many ways.

Major Global Firms Buy Indonesia Palm Oil Produced By Child Labor (R.)

Global consumer companies, including Unilever, Nestle, Kellogg and Procter & Gamble, have sourced palm oil from Indonesian plantations where labor abuses were uncovered, Amnesty International said on Wednesday. Children as young as eight worked in “hazardous” conditions at palm plantations run by Singapore-based Wilmar International and its suppliers on the Indonesian islands of Kalimantan and Sumatra, Amnesty said in a report. Amnesty, which said it interviewed 120 workers, alleges that many of them worked long hours for low pay and without adequate safety equipment. The palm oil from these plantations could be traced to nine multinational companies, it said.

“Despite promising customers that there will be no exploitation in their palm oil supply chains, big brands continue to profit from appalling abuses,” said Meghna Abraham, senior investigator at Amnesty. The NGO said it chose Wilmar as the focus of its investigation as the company is the world’s largest processor and merchandiser of palm and lauric oils, controlling more than 43% of the global palm oil trade. Other companies operating palm plantations in Indonesia include Golden Agri-Resources, Indofood Agri Resources and Astra Agro Lestari.

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What a blemish on the US this is.

North Dakota Moves To Block Supplies From Reaching Pipeline Protesters (R.)

North Dakota officials on Tuesday moved to block supplies from reaching oil pipeline protesters at a camp near the construction site, threatening to use hefty fines to keep demonstrators from receiving food, building materials and even portable bathrooms. Activists have spent months protesting plans to route the $3.8 billion Dakota Access Pipeline beneath a lake near the Standing Rock Sioux reservation, saying the project poses a threat to water resources and sacred Native American sites. State officials said on Tuesday they would fine anyone bringing prohibited items into the main protest camp following Governor Jack Dalrymple’s “emergency evacuation” order on Monday. Earlier, officials had warned of a physical blockade, but the governor’s office backed away from that.

Law enforcement would take a more “passive role” than enforcing a blockade, said Maxine Herr, a spokeswoman for the Morton County Sheriff’s Department. “The governor is more interested in public safety than setting up a road block and turning people away,” Herr said by telephone. Officers will stop vehicles they believe are headed to the camp and inform drivers they are committing an infraction and could be fined $1,000. These penalties should serve as a hindrance, according to Cecily Fong, a spokeswoman for the North Dakota Department of Emergency Services. “So that effectively is going to block that stuff (supplies), but there is not going to be a hard road block,” Fong said by telephone.

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One can be quite specific here. Insurers so far don’t act because the government doesn’t.

The Areas America Could Abandon First (BBG)

So far this year, the Federal Emergency Management Agency has spent $1.1 billion on what are called Individual Assistance payments, which help households recover from natural disasters. There are no limits on the number of times a household can apply, so the program isn’t just a safety net; for some people, it’s effectively a subsidy to live in areas that are especially vulnerable to hurricanes, floods and storm surges. That hasn’t gone unnoticed in Washington. In 1999, a Nebraska congressman introduced a bill preventing some properties with multiple claims from getting help – not just disaster relief, but also subsidized flood insurance. Two years later, the George W. Bush administration’s first budget proposed denying aid to the “worst offending repetitive loss properties.”

Under President Barack Obama, FEMA proposed reducing disaster aid for public buildings damaged more than once in the previous decade if local governments hadn’t done anything to protect them. None of those proposals took effect. But as extreme weather gets worse, those federal subsidies will only become more expensive – increasing the need to rethink government support for those who choose to live in harm’s way. “Climate change is real and will lead to even more frequent and costly disasters,” Rafael Lemaitre, FEMA’s director of public affairs, told me. “We must continue to work with states to implement longer-term projects and strategies that mitigate against climate change.” That means it’s time to consider an impolitic question: If federal support gets rolled back, which areas will people have the greatest incentive to leave?

To answer that, I asked FEMA which parts of the country have the most households that repeatedly get Individual Assistance payments, which are a useful proxy for exposure to all types of extreme weather. The agency gave me a list of 1,930 counties where at least one address had requested such aid more than once since 1998 – 1.3 million households in total. That data, which the agency said it had never before compiled, is reflected in the graphic below; the shading represents the number of households per capita that have applied for FEMA aid multiple times.

Unsurprisingly, the areas where households are most likely to repeatedly request aid are generally along coasts. The surprise is how they’re distributed: Rather than being spread uniformly along shorelines, a small number of counties account for the most repeat claims – one more reminder that the burden of climate change will not fall evenly. That’s also true within the most affected counties. The charts below show the number of households per capita requesting disaster aid more than once since 1998, by ZIP code, for four areas with especially high concentrations of repetitive claims. These charts don’t just map the losers from any reduction in federal support: At a more basic level, they show some of the places Americans will face the most pressure to abandon because of extreme weather — at least, people who can’t afford the full cost of recovering from natural disasters.

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Unverified, but not at all unlikely.

Turkey Has Secret Plan To Send 3,000 Refugees To Greece Every Day (Ind.)

The Turkish government has a secret plan to allow 3,000 refugees to sail to Greece every day, intelligence officials have claimed. Greek analysts claim thousands of dinghies and motorboats have massed along the Turkish coast as the refugee deal agreed between Ankara and Brussels looks set to unravel. Turkish President Erdogan threatened to open the borders if the EU continued to block talks on the country’s accession to the union. The European Parliament voted to temporarily halt membership talks amid concerns about the brutal crackdown on dissent in the country following an attempted military coup in July. Mr Erdogan warned: “If you go any further, these border gates will be opened.

Neither me nor my people will be affected by these dry threats. It wouldn’t matter if all of you approved the vote”. The deal reached in March meant any refugee who arrived on Italian or Greek shores would be sent back to Turkey in exchange for EU member countries accepting another refugee from a Turkish camp on a “one for one” basis. Ankara will also received aid money to help it care for the refugees within its borders, visa free travel for its citizens and the speeding up of membership talks. But according to Greek newspaper Proto Thema, Ankara has given up on hope of Brussels living up to its side of the deal and could start allowing the refugees to flee “within a matter of weeks”.

Greek intelligence expert Athanassios Drougas told The Times: “No one is underestimating Mr Erdogan and his unpredictability these days. “These plans, along with explicit threats that the Turkish president has made in recent weeks, have Greece’s joint chiefs of staff seriously concerned. “They are fearful and they have told the political leadership here that if Turkey opens the floodgates yet again, Greece, in its current state of financial and social distress, will not be able to withstand the shock. It will spell war or wreak the havoc of one. “With Europe in a mess, Mr Erdogan feels he has a free hand in trying to blackmail the bloc using the refugee crisis as leverage.”

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Nov 242016
 
 November 24, 2016  Posted by at 9:49 am Finance Tagged with: , , , , , , , , , , ,  2 Responses »
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Kennedy and Johnson Morning of Nov 22 1963


Another Election Year, Another Bunch Of Fake Growth Numbers (John Rubino)
China Vows To Defend Trade Rights In Face Of Trump Tariff Threats (R.)
IMF: Chinese Banks Disguise A Massive Amount Of Bad Debt (BI)
The ‘Ownership Society’ Came And Went – A Long Time Ago (MW)
How (Slightly) Higher Mortgage Rates Maul Housing Bubble 2 (WS)
‘Brexit Will Blow £59 Billion Hole In UK Public Finances’ (G.)
Pro-Brexit Lawmakers Attack Fiscal Watchdog’s Gloomy Outlook (BBG)
Capital Flight From Italy (Reinhart)
Jill Stein Raises Over $2 Million To Request US Election Recounts (G.)
Bernie Sanders Should Visit Trump Sooner Rather Than Later (NYDN)
Merkel Warns Against Fake News Driving Populist Gains (AFP)
Putin: EU Resolution Equating RT to ISIS A ‘Degradation Of Democracy’ (R.)
US Navy’s New $4 Billion Stealth Warship Breaks Down – Again (ZH)
Greece Wants To Conclude EU/IMF Review, Won’t Accept ‘Irrational’ Demands (R.)
Greek Businesses Move Abroad To Escape Austerity (R.)

 

 

“So why the approximately $1.8 trillion surge in government borrowing? Because a robustly-healthy economy was necessary to help the party in power stay in power.”

Another Election Year, Another Bunch Of Fake Growth Numbers (John Rubino)

Some pretty good economic reports have energized various parts of the financial markets lately. Consumer spending is up, GDP is exceeding expectations and even factory orders, that perennial downer, popped this morning. In response the dollar is soaring and interest rates are at breaking out of their multi-decade down-channel. The economy is clearly recovering, implying a return to normality. Right? Nah, it’s just the usual election year illusion. When the presidency is at stake the party in power always pumps up spending in an attempt to put people back to work and create the impression of a well-run country whose leaders deserve more time in the spotlight. After the election, spending returns to trend and the resulting bad news gets buried in “political honeymoon” media coverage.

How do we know this year is following the script? By looking at the federal debt. If the government is borrowing more than usual and (presumably) spending the proceeds, then it’s likely that the economy is getting a bit more than its typical diet of stimulus. So here you go: Note that after seven years of massive increases, the federal debt plateaued in 2015, which is what you’d expect in the late stages of a recovery. With full employment approaching and asset prices high, there should be plenty of tax revenues flowing in and relatively few people on public assistance, so the budget should be trending towards balance. Well, more people are working this year than last, and stock, bond and home prices all rose in the first half of the year. So why the approximately $1.8 trillion surge in government borrowing? Because a robustly-healthy economy was necessary to help the party in power stay in power.

This is a huge jump in government debt, even by recent standards. And its impact is commensurately large, accounting for a big part of the “growth” seen in recent months. But it’s also unsustainable. You don’t double a government’s debt in a single decade (from an already historically high level) and then keep on borrowing. At some point an extreme event or policy choice will put an end to the orgy. Either the markets impose discipline through a crisis of some sort, or the government adopts a policy of currency devaluation or debt forgiveness. And – in a nice ironic twist – the people who did the insanely-excessive borrowing are leaving town, to be replaced by folks who will inherit something unprecedented, with (apparently) no clear idea of what’s coming or what will be necessary in response.

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Protectionism and globalism in one.

China Vows To Defend Trade Rights In Face Of Trump Tariff Threats (R.)

China will defend its rights under WTO tariff rules if US president-elect Donald Trump moves toward executing his campaign threats to levy punitive duties on goods made in China, a senior trade official has said. Zhang Xiangchen, China’s deputy international trade representative, also told a news conference in Washington on Wednesday that a broad consensus of academics, business people and government officials have concluded that China is not manipulating its yuan currency to gain an unfair trade advantage, as Trump has charged. “I think after Mr Trump takes office, he will be reminded that the United States should honour its obligations as a member of the WTO,” Zhang said through an interpreter. “And as a member of the WTO, China also has the right to ensure its rights as a WTO member.”

Trump has said China is “killing us” on trade and that he would take steps to reduce the large US goods trade deficit with China, including labelling Beijing as a currency manipulator soon after he takes office and levying duties of up to 45% on Chinese goods to level the playing field for US manufacturers. Trump said on Monday he will formally exit the 12-country TPP trade deal in January. China is not a signatory to the TPP. Zhang, who spoke at the closing news conference for a two-day technical meeting of US and Chinese trade officials in Washington, was not specific on what steps China would take to protect its rights under WTO rules. The global trading body prohibits members from unilaterally raising tariffs above levels that they have committed to maintain.

China’s state-run Global Times newspaper last week warned that a 45% Trump tariff would paralyse US-China bilateral trade. “China will take a tit-for-tat approach then. A batch of Boeing orders will be replaced by Airbus. US auto and [Apple] iPhone sales in China will suffer a setback, and US soybean and maize imports will be halted,” the newspaper warned.

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Shadow securities. US redux.

IMF: Chinese Banks Disguise A Massive Amount Of Bad Debt (BI)

China’s banks are disguising bad debts by turning them into “securitized packages” rather than writing them down as non-performing loans, according to the IMF. The “untradeable debt” comes from China’s “shadow credit” world, which has generated a massive amount of credit that has the potential to become suddenly illiquid. The debts consist of interbank loans in “a structure potentially susceptible to rapid risk transmission and destabilizing liquidity events,” the IMF says. The amount of “shadow credit” grew 48% in 2015, to RMB 40 trillion ($580 billion), the IMF says, “equivalent to 40% of banks’ corporate loans and 58% of GDP.” If any of this sounds familiar, that’s because it is. It’s similar in principal to the way American banks disguised bad mortgages inside securitized packages before the Great Financial Crisis of 2007-2008.

Back then, US mortgage providers gave out too many loans to people who couldn’t repay them. On its own, that should not have been a problem. A mortgage default only hurts the bank that made the loan. But banks bundled together packages of those mortgages and sold them as “mortgage-backed securities” to other institutions. Bad mortgages were mixed in with good ones, making it impossible for investors to judge their quality. When it became obvious that some of these packages were toxic, no one wanted to buy any them. The market became suddenly illiquid. And the credit derivative hedges and leveraged bets layered upon them magnified the problem throughout the entire banking system, creating the financial collapse that plunged most of the world into recession.

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It was always just a fabricated dream.

The ‘Ownership Society’ Came And Went – A Long Time Ago (MW)

Of all the aftereffects of the housing bust and financial crisis, the steady decline in the homeownership rate might be among the most pernicious. Homeownership is traditionally one of the best means into the middle class, and it’s still popularly equated with the American Dream. But in a presentation last week, St. Louis Federal Reserve economist William Emmons demonstrated that homeownership has been losing ground for decades. What’s more, Emmons showed that higher ownership rates were likely coaxed along by government policies and national priorities appropriate for a certain moment in history and unsustainable beyond that. After the Depression, Emmons noted, New Deal policies “laid the foundation” for a huge increase in homeownership.

Those policies included the creation of a government financial system, such as the Federal Housing Administration, Fannie Mae, and the Federal Home Loan Banks. But just as important was the return of millions of service members from World War II, rising incomes and a prosperous economy, a national push for a country full of suburban single-family homes and highways to connect them all, as well as a national process of Americans “sorting themselves out” by race and class into the broad geographic outlines that would persist for decades. That meant the U.S. enjoyed robust growth – until it didn’t. Not only was there little room left to grow, but other changes began to influence ownership, Emmons said. Americans began to age, pushing off marriage, childbearing and home-buying until later.

The U.S. is also becoming more racially and ethnically diverse. Hispanics and African-Americans have traditionally had more limited opportunities to achieve homeownership – but as Emmons pointed out, citing research from the Harvard Joint Center for Housing Studies, “aspirations to own a home are higher among African-Americans and Latinos than among whites and Asians, despite homeownership rates that are 20 to 30 percentage points lower.” And while much of the impact of the 2008 crash has ebbed, it still continues to impact many people through diminished personal wealth, damaged credit scores, blighted neighborhoods, and some loss of trust in financial institutions.

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How ‘little things’ add up.

How (Slightly) Higher Mortgage Rates Maul Housing Bubble 2 (WS)

After the brutal beating following Election Day, US Treasuries took a breather early this week. But today, the beating resumed and will continue until the mood improves. Mid-day, the 10-year Treasury fell so hard that its yield, which moves in the opposite direction of price, spiked to 2.42%. By the end of the day, the 10-year yield was at 2.36%, up 4 basis points for the day, and up an entire percentage point from July this year: The market is 100% certain that the Fed will stop flip-flopping in mid-December and raise rates by moving the upper limit of the Fed funds target range to 0.75%. The markets see more rate hikes next year. A Fed funds rate with the first “1”-handle since 2008 would be a phenomenon a whole generation of Wall Street gurus has never seen in their professional lives.

Mortgage rates are chasing after Treasury rates. The Mortgage Bankers Association reported today that the 30-year fixed-rate conforming mortgage ($417,000 or less) reached 4.16%, its “highest weekly average since the beginning of 2016.” This caused a flurry of activity. Last week, amid the post-election interest rate spike, mortgage applications plunged. But homebuyers may be trying to lock in whatever rate they can get, before they go even higher, and mortgage applications surged. Ironically, from a historical point of view, nothing major has happened so far. That spike is still small compared to what came before, including the spike during the Taper Tantrum in the summer of 2013, when the Fed started musing about ending QE Infinity. Compared to prior years, rates are still very, very low, but home prices have since soared, and for home buyers even a minor uptick makes a world of difference.

From the peak of Housing Bubble 1, which in San Francisco occurred in 2007, to Q3 2016, the median house price soared 45%. But due to plunging mortgage rates, the monthly housing costs increased only 14%. Now with rates rising, that process is going to reverse. The household income needed to qualify for a 30-year fixed rate mortgage with 20% down on that median $1.3 million house in San Francisco was $251,000 before Election Day. Paragon observes: “By Friday, November 18, the income requirement increased by $13,000. And if the interest rate goes up to 5% (and again, we are not saying it will), an additional $35,000 in annual income would be required.”

Hence, at 5%, a minimum qualifying household income of $286,000 a year. In this scenario, even in less costly markets, there are two things that happen: One, many people have to step down to a lower-priced home, or they don’t buy at all. A market-wide shift of this type puts downward pressure on prices and volume. And two, as people stretch more to buy homes at higher interest rates and higher monthly costs, they have even less money to spend on other things. This creates a new drag on consumer spending. It’s how low mortgage rates not only subsidized the house price bubble but the entire economy by giving consumers more money to spend – not just the US economy but exporter nations around the world.

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Or will it?

‘Brexit Will Blow £59 Billion Hole In UK Public Finances’ (G.)

Philip Hammond conceded that Brexit will blow a £59bn black hole in the public finances over the next five years, as he outlined plans to boost investment in infrastructure and housing to equip the UK economy for life outside the EU. In his first fiscal statement, the chancellor, who had supported remain, sought to strike a cautiously upbeat tone about the country’s prospects, saying the economy had “confounded commentators at home and abroad with its strength and its resilience” since the referendum result last June. But the first official projections conducted after the vote of the likely impact of leaving the EU pointed to significantly weaker growth after Brexit. The Office for Budget Responsibility (OBR) announced that there would be a cumulative £122bn of extra borrowing over the next five years, with £59bn of that as a direct result of Brexit.

Other factors included weaker-than-expected tax revenues, and policy changes, including Hammond’s decision to spend more on infrastructure. George Osborne was expecting to achieve a surplus of £11bn on the public finances by 2020-21; instead, the OBR is now forecasting a £21bn deficit – and public debt is expected to peak at more than 90% of GDP. With little cash to spare, Hammond offered only modest handouts to the “just about managing” families (Jams) Theresa May’s government had said it wanted to help, although he repeatedly used the mantra of “building an economy that works for everyone”. The chancellor announced a renewed freeze in fuel duty, to help motorists – largely paid for with an increase in insurance premium tax from 10% to 12% – and a partial reversal of planned cuts to universal credit.

But Labour said there was no cash for either the NHS or social care, which are under increasing strain with winter approaching. Instead, the main thrust of Hammond’s first set-piece outing at the dispatch box was how to help Britain withstand the challenges of leaving the EU.

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Agree to disagree.

Pro-Brexit Lawmakers Attack Fiscal Watchdog’s Gloomy Outlook (BBG)

Conservative lawmakers attacked Britain’s fiscal watchdog after it warned that Brexit would cost £60 billion ($75 billion) in extra borrowing as the economy falters. The Office for Budget Responsibility’s forecast — the first official assessment of the costs related to leaving the bloc – also stated that exiting the EU would leave Britain with less potential for sustainable growth. Chancellor of the Exchequer Philip Hammond, who presented the forecasts alongside his Autumn Statement Wednesday, said the predictions showed there is an “urgent” need for Britain to tackle its long-term economic weaknesses. “We’ve had an endless slew of gloom and doom, and I just don’t buy it,” said Kwasi Kwarteng, a Tory lawmaker who backed the campaign to leave the EU. “They haven’t exactly had a brilliant track record. I’d take their predictions with a pinch of salt.”

Pro-Brexit lawmakers have been critical of both the OBR and the Treasury for overstating the negative consequences of Brexit. While Hammond made brief references to the opportunities that leaving may bring, his tone was one of caution, with few giveaways and a focus on creating a more productive economy that could weather future shocks. Responding to complaints from pro-Brexit politicians, Hammond told lawmakers that economic forecasting “is not a precise science.” He added: “The OBR very specifically says in its report that there is an unusually high degree of uncertainty in the forecasts it is making because of the unusual circumstances.”

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It’s high time for Italy to go its own separate ways. There’s nothing to gain from the EU anymore, but lots to lose.

Capital Flight From Italy (Reinhart)

Understandably, after the surprise victory in June of the “Leave” campaign in the United Kingdom’s Brexit referendum, and of Donald Trump in the United States’ presidential election, no one has much faith in polls in advance of the Italian vote. There is, however, a disquieting real-time poll of investors’ sentiment: capital flight from Italy has accelerated this year. There is a recent precedent for this. In the summer of 2015, Greece’s short-lived default on its IMF loan and the introduction of capital controls and deposit-withdrawal restrictions were at the center of the eurozone drama. Tensions between the Greek and German governments ran high, and speculation about whether Greece would remain in the eurozone escalated.

The stage has now shifted to the much larger Italian economy. In the current environment of uncertainty, yield spreads on Italian bonds have widened to about 200 basis points over German bunds. Economic and political conditions in the two debt-laden southern European economies differ in important respects; but there are also similarities. Economic growth in both countries has lagged far behind other advanced economies for more than a decade, but most markedly since the Global Financial crisis of 2008-2009. According to IMF estimates, real per capita income in Italy is about 12% below what it was in 2007, with only Greece faring worse. The problem of bank insolvency, endemic in Greece, where nonperforming loans account for more than one-third of bank assets, is not as generalized in Italy.

Still, the uncertain resolution of Italy’s third-largest bank, Monte dei Paschi, together with the Italian government’s limited resources to deal with weak banks, has fueled unease among depositors. Bankers also warn that the plan for Monte dei Paschi’s rescue may be jeopardized by the December referendum, which could trigger another round of decline in share prices. But, for all the talk of a looming banking crisis, the balance-of-payments crisis already underway in Italy since the first half of 2016 is the main factor driving the real-time poll of investors. Prior to the adoption of the euro, an unsustainable balance-of-payments position in Italy (as in other countries with their own currencies) would typically spur the central bank to raise interest rates, thereby making domestic financial assets more attractive to investors and stemming capital flight. With the ECB setting monetary policy for the eurozone as a whole, this is no longer an option for Banca d’Italia.

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Nostalgia for hanging chads.

Jill Stein Raises Over $2 Million To Request US Election Recounts (G.)

Jill Stein, the Green party’s presidential candidate, is prepared to request recounts of the election result in several key battleground states, her campaign said on Wednesday. Stein launched an online fundraising page seeking donations toward a a multimillion-dollar fund she said was needed to request reviews of the results in Michigan, Pennsylvania and Wisconsin. Before midnight EST on Wednesday, the drive had already raised more than the $2m necessary to file for a recount in Wisconsin, where the deadline to challenge is on Friday. Stein said she was acting due to “compelling evidence of voting anomalies” and that data analysis had indicated “significant discrepancies in vote totals” that were released by state authorities.

“These concerns need to be investigated before the 2016 presidential election is certified,” she said in a statement. “We deserve elections we can trust.” The fundraising page said it expected to need around $6m-7m to challenge the results in all three states. Stein’s move came amid growing calls for recounts or audits of the election results by groups of academics and activists concerned that foreign hackers may have interfered with election systems. The concerned groups have been urging Hillary Clinton, the defeated Democratic nominee, to join their cause.

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As I said yesterday in “Trump Moves as America Stands Still”.

Bernie Sanders Should Visit Trump Sooner Rather Than Later (NYDN)

Trump aside, evidently the most clairvoyant messenger of 2016 was Sanders, who got pitifully little support from the Democratic Party establishment — including a raw deal from the DNC, which tilted the scales against him in order to coronate Hillary. His brand of anti-Wall Street, anti-elite populism is ascendant. He is the tribune of the progressive youth, many of whom refused to back Hillary despite her repeated (and hollow) entreaties. So what should Sanders do now? Well, how about meeting with the new President-elect? It might seem incongruous. What would the nationalist, brash Trump have to gain from the aging socialist Sanders? Well, maybe quite a bit. Trump explicitly proclaimed during the campaign that he was going to take a page from Bernie’s playbook, much to the consternation of conservative pundits.

“I’m going to be taking a lot of the things Bernie said and using them,” Trump declared in April. And indeed, Trump followed through on the pledge: He made opposition to the Trans-Pacific Partnership a centerpiece of his campaign, thus emphasizing an area of agreement with Sanders. (Trump has since confirmed that the trade deal will be canceled.) He called for a reduced U.S. military presence abroad. And he even repeatedly defended Sanders before millions of people at the televised debates, pointing out that he’d been screwed over by the DNC and Clinton minions. Naturally, Trump and Sanders will never agree on everything, but where they do see eye-to-eye, why not take advantage?

Two days after the election, Sanders issued a statement noting Trump’s success at connecting with folks “sick and tired of establishment economics, establishment politics and the establishment media.” Sanders then offered to “work with” him on discrete initiatives. Trump has already announced that an infrastructure funding bill is one of his top priorities, so who better than Sanders to help steer the legislative process in the most fruitful possible direction? (Bernie this week characterized Trump’s plan as a “scam,” so why not register those concerns in person?)

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Sounds desperate.

Merkel Warns Against Fake News Driving Populist Gains (AFP)

German Chancellor Angela Merkel warned Wednesday against the power of fake news on social media to spur the rise of populists, after launching her campaign for a fourth term. Speaking in parliament for the first time since her announcement Sunday that she would seek re-election next year, Merkel cautioned that public opinion was being “manipulated” on the internet. “Something has changed – as globalisation has marched on, (political) debate is taking place in a completely new media environment. Opinions aren’t formed the way they were 25 years ago,” she said. “Today we have fake sites, bots, trolls – things that regenerate themselves, reinforcing opinions with certain algorithms and we have to learn to deal with them.”

Merkel, 62, said the challenge for democrats was to “reach and inspire people – we must confront this phenomenon and if necessary, regulate it.” She said she supported initiatives by her right-left coalition government to crack down on “hate speech” on social media in the face of what she said were “concerns about the stability of our familiar order”. “Populism and political extremes are growing in Western democracies,” she warned. Last week, Google and Facebook moved to cut off ad revenue to bogus news sites after a US election campaign in which the global misinformation industry may have influenced the outcome of the vote. But media watchers say more is needed to stamp out a powerful phenomenon seen by some experts as a threat to democracy itself.

Merkel’s conservative Christian Democrats are the odds-on favourites to win the German national election, expected in September or October 2017.

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Well, we already knew the EU has gone crazy.

Putin: EU Resolution Equating RT to ISIS A ‘Degradation Of Democracy’ (R.)

The European Parliament called on the EU and its states to do more to counter Russian “disinformation and propaganda warfare” on Wednesday, drawing an angry response from President Vladimir Putin. A motion endorsing a committee report, which also called for more effort against attempts by Islamic State to radicalize Europeans, passed by 304 votes to 179. Members on the far left and far right were opposed; many in the center-left abstained. “The European Parliament … expresses its strong criticism of Russian efforts to disrupt the EU integration process and deplores, in this respect, Russian backing of anti-EU forces in the EU with regard, in particular, to extreme-right parties, populist forces and movements that deny the basic values of liberal democracies,” the 59-point motion read.

With East-West relations in deep freeze since Moscow responded to an EU pact with Ukraine by annexing Crimea in 2014, the Parliament’s report accused the Kremlin of funding media outlets that spread falsehoods and of sponsoring eurosceptic movements in Western Europe which are growing in strength. Putin said that after lecturing Russia on democracy Europe was now trying to silence dissenting opinions. He told reporters in Moscow: “We are observing a certain, quite obvious, degradation … of how democracy is understood in Western society, in this particular case in the European Parliament.” In Strasbourg, center-left lawmakers said they could not endorse the report because Russia was not alone in posing such threats and they objected to the way it appeared to be given an equivalent status to the non-state militants of Islamic State.

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Not a bug but a feature. Given the multibillion ‘trouble’ with the JSF, what do you think the odds are the military-industrial complex makes broken equipemnt on purpose, for profit?

US Navy’s New $4 Billion Stealth Warship Breaks Down – Again (ZH)

For the second time in two months, The Navy’s new $4 billion stealth warship has broken down. As Military.com reports, the ripped-from-the-pages-of-a-sci-fi mag-looking USS Zumwalt is now in Panama for repairs after suffering a breakdown while passing through the Panama Canal on Monday evening. Military.com’s Hope Hodge Seck reports that a spokesman for U.S. 3rd Fleet, Cmdr. Ryan Perry, told Military.com that the commander of 3rd Fleet, Vice Adm. Nora Tyson, had instructed the USS Zumwalt, the first in a new class of stealthy destroyers, to remain at ex-Naval Station Rodman in Panama to address the engineering casualty. “The timeline for repairs is being determined now, in direct coordination with Naval Sea Systems and Naval Surface Forces,” he said in a statement.

“The schedule for the ship will remain flexible to enable testing and evaluation in order to ensure the ship’s safe transit to her new homeport in San Diego.” An official confirmed to Military.com that the ship had been transiting south through the canal en route to its new San Diego homeport when the incident occurred. The ship had to be towed to pier by the Panama Canal Authority, the official said. While details about what caused the breakdown were few, Navy Times – which first reported the incident – cited reports about problems with heat exchangers in the ship’s integrated power plant that had contributed to the mishap. [..]The ship also made headlines earlier this month when multiple outlets reported that the missiles fired from its 155mm Advanced Gun System, at $800,000 apiece, were too expensive for the Navy to buy in large quantities [..]

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But they’ve accepted tons of others already?!

Greece Wants To Conclude EU/IMF Review, Won’t Accept ‘Irrational’ Demands (R.)

Greece wants to conclude its bailout review but cannot accept what it sees as irrational demands on labor reform or for extra austerity, Prime Minister Alexis Tsipras said on Wednesday, in his first speech to lawmakers after a cabinet reshuffle. Negotiations between Greece and its official creditors – the EU and the IMF – hit a snag this week due to differences on fiscal targets, energy and labor reforms in the country, where one in four is unemployed. “The Greek government is fully consistent with what was agreed and has proven it has the political will to conclude the second bailout review without meaningless delays,” Tsipras told his Syriza party lawmakers. “But this does not mean we would discuss irrational demands.”

The mission chiefs overseeing Greece’s bailout program implementation left Athens on Tuesday. Government officials said talks would continue but the latest disagreements and a long-standing rift among the creditors on medium-term fiscal targets have clouded Greek hopes for a swift conclusion. Unpopular labor reforms, including collective bargaining, a mechanism to set the minimum wage and giving companies more freedom to lay off workers are the main sticking point in talks with lenders. Tsipras said differences could be bridged if there is political will on all sides, adding that an agreement could be reached by Dec. 5, when euro zone finance ministers will meet in Brussels.

“It is realistic but also absolutely necessary to conclude the talks soon to secure at the scheduled Dec. 5 … meeting the agreement needed on a political level in order to conclude the bailout review,” he said. Tsipras said this would pave the way for talks on debt relief measures, not only in the short term but also in the medium and long term, which would allow Greece to lower primary surplus targets beyond 2018, when its bailout program ends.

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The Troika forces Greece to strangle itself.

Greek Businesses Move Abroad To Escape Austerity (R.)

Greek businessman Prokopis Makris believes moving to Bulgaria three years ago was the best decision he ever made. The accountant shut his failing furniture company in Greece and opened a business helping other entrepreneurs move to Bulgaria to escape a 29% tax rate, which has jumped since Athens adopted austerity as part of an international bailout. “We are bombarded with taxes in Greece, businesses are being annihilated,” he says in his plush office overlooking the town square of Petritsi, a Bulgarian town about 12 km (seven miles) north of the border with Greece. The debt crises faced by Greece and several other European countries led to drastic spending cuts and tax increases to improve government finances.

But the higher taxes punished businesses forcing many to shut or move to lower tax jurisdictions such as Bulgaria or Cyprus, helping those economies but undermining the recovery needed to balance the books at home. The number of Greek owned businesses based in Bulgaria, where the corporate tax rate is only 10%, has risen to 17,000 from 2,000 in 2010, when Greece had its first bailout, according to Bulgarian authorities. The Greek government is concerned. It plans a series of tax audits in cooperation with Bulgaria to determine if these business defections are merely changes of address designed to avoid tax rather than a physical relocation of operations. [..] Six hundred kilometers north of Athens, the Greek-Bulgarian border is teeming with traffic. A ravine through mountains on the Greek side gives way to a sweeping valley where agriculture and vineyards are the mainstay of the local economy.

At two small industrial parks 5 km inside Bulgaria, Greek signs are everywhere, advertising storage and office space. “There are dozens of Greek businesses just in this area alone, from transport companies to textile businesses and construction materials,” said Yiorgos Kalaitzoglou who runs a logistics business out of one of the industrial parks where a sign reads, “Land of Opportunities”. Three years ago, his business was stuttering in Greece. He moved to Bulgaria, leaving his wife and family in Thessaloniki, Greece’s second largest city an hour’s drive away. “The taxman in Greece takes 70 to 90% of earnings, Greece simply doesn’t let you live,” the 50-year-old said as he walked through a warehouse stacked with ladders and paint tubs.

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Nov 172016
 
 November 17, 2016  Posted by at 9:46 am Finance Tagged with: , , , , , , , ,  3 Responses »
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Dorothea Lange Salvation Army, San Francisco, California. Unemployed young men 1939


Who’ll Get Hit by Fallout of $11 Trillion US Commercial Property Bubble? (WS)
US Mortgage Applications Crash 30% As Borrowing Rates Surge (ZH)
Congressional Panel Urges Ban On China State Firms Buying US Companies (R.)
Foreign Central Banks Liquidate Record $375 Billion In US Paper (ZH)
Panic In India As Gold Price Skyrockets After Currency Ban (AM)
Modi May Need Six More Months to Replace India’s Junk Banknotes (BBG)
NATO Prepares for Trump Presidency (Spiegel)
Singapore’s Recession Risk Rises As October Exports Show 12% Decline (R.)
China Civil War Is the Real Black Swan (RV)
You Are Still Crying Wolf (Scott Alexander)
One In Three UK Working Families Struggle To Pay Energy Bills (G.)
Canadian Province To Give Every Citizen $1,320 Basic Income (Ind.)
Obama Defends Globalization On Germany Visit (BBC)
Athens Clings To Obama’s Words As Focus Shifts To Berlin (Kath.)
Schaeuble Crushes Greek Debt Relief Hopes that Obama May Have Sowed (GR)
37.8% of Greek Children At Risk Of Poverty (Kath.)
Drowning Deaths In Mediterranean Already 20% Higher Than All Of Last Year (G.)

 

 

“The Green Street Commercial Property Price Index has soared 107% from the trough in May 2009 and now exceeds the peak of the totally crazy bubble in 2007 by 26%“.

Who’ll Get Hit by Fallout of $11 Trillion US Commercial Property Bubble? (WS)

Warnings about the loans, bonds, and commercial-mortgage-backed securities (CMBS) tied to the vast $11-trillion commercial property sector in the US have been hailing down for months. Moody’s Investor Services just warned about the rising delinquency rate of some $360 billion in CMBS it rates. Delinquencies of 60+ days jumped from 4.6% last year to 5.6% in September. Fitch Ratings has been fretting about valuations in the sector, and CMBS, for months. “Valuation and lending trends are not sustainable in the medium term,” it said most recently in its November report. It pinpointed debt backed by apartment buildings as a particular trouble spot. But now it’s also fretting about construction loans, which “experienced the highest loss severity in the last crisis, and we expect a similar trend in the next downturn,” it said.

It’s worried about the banks, whose commercial real estate (CRE) lending has reached “record levels”: “All of the most concentrated banks – those with more than 300% of risk-based capital in CRE – have less than $50 billion in assets and most have assets below $10 billion. These smaller banks also have varying degrees of sophistication in their risk management practices.” Fitch laments that the “timing and severity of this softening is uncertain and depends on factors including interest rates and overall economic conditions.” Alas, since the report was released on Election Day, interest rates have alread jumped. This comes at the worst possible moment, at the peak of the most gigantic CRE price bubble the US has ever seen. The Green Street Commercial Property Price Index has soared 107% from the trough in May 2009 and now exceeds the peak of the totally crazy bubble in 2007 by 26%:

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Let’s see if a normal economy can still work.

US Mortgage Applications Crash 30% As Borrowing Rates Surge (ZH)

Dear Janet…In the last few months, as The Fed has jawboned a rate hike into markets, mortgage applications in America have collapsed 30% to 10-month lows – plunging over 9% in the last week as mortgage rates approach 4.00%.

 

We suspect the divergent surge in homebuilders is overdone…

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“We don’t want the U.S. government purchasing companies in the United States, why would we want the Chinese Communist government purchasing companies in the United States?”

Congressional Panel Urges Ban On China State Firms Buying US Companies (R.)

U.S. lawmakers should take action to ban China’s state-owned firms from acquiring U.S. companies, a congressional panel charged with monitoring security and trade links between Washington and Beijing said on Wednesday. In its annual report to Congress, the U.S.-China Economic and Security Review Commission said the Chinese Communist Party has used state-backed enterprises as the primary economic tool to advance and achieve its national security objectives. The report recommended Congress prohibit U.S. acquisitions by such entities by changing the mandate of CFIUS, the U.S. government body that conducts security reviews of proposed acquisitions by foreign firms.

“The Commission recommends Congress amend the statute authorizing the Committee on Foreign Investment in the United States (CFIUS) to bar Chinese state-owned enterprises from acquiring or otherwise gaining effective control of U.S. companies,” the report said. CFIUS, led by the U.S. Treasury and with representatives from eight other agencies, including the departments of Defense, State and Homeland Security, now has veto power over acquisitions from foreign private and state-controlled firms if it finds that a deal would threaten U.S. national security or critical infrastructure. If enacted, the panel’s recommendation would essentially create a blanket ban on U.S. purchases by Chinese state-owned enterprises.

The panel’s report is purely advisory, but could carry extra weight this year because they come as President-elect Donald Trump’s transition team is formulating its trade and foreign policy agenda and vetting candidates for key economic and security positions. Congress also could be more receptive, after U.S. voter sentiment against job losses to China and Mexico helped Republicans retain control of both the House and the Senate in last week’s election. Trump strongly criticized China throughout the U.S. election campaign, grabbing headlines with his pledges to slap 45 percent tariffs on imported Chinese goods and to label the country a currency manipulator on his first day in office. “Chinese state owned enterprises are arms of the Chinese state,” Dennis Shea, chairman of the U.S.-China Economic and Security Review Commission, told a news conference. “We don’t want the U.S. government purchasing companies in the United States, why would we want the Chinese Communist government purchasing companies in the United States?”

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Normalization?

Foreign Central Banks Liquidate Record $375 Billion In US Paper (ZH)

One month ago, when we last looked at the Fed’s update of Treasuries held in custody, we noted something troubling: the number had dropped sharply, declining by over $22 billion in one week, one of the the biggest weekly declines since January 2015, pushing the total amount of custodial paper to $2.805 trillion, the lowest since 2012. One month later, we refresh this chart and find that in last week’s update, foreign central banks continued their relentless liquidation of US paper held in the Fed’s custody account, which tumbled by another $14 billion over the course of a week, pushing the total amount of custodial paper to $2.788 trillion, a new post-2012 low.

Today, to corroborate the disturbing weekly slide in the Fed’s custody data, we also got the latest monthly Treasury International Capital data for the month of September, which showed that the troubling trend presented one month ago, has accelerated to an unprecedented degree. Recall that a month ago,  we reported that in the latest 12 months we have observed a not so stealthy, actually make that a massive $343 billion in Treasury selling by foreign central banks in the period July 2015- August 2016, something unprecedented in size. Fast forward to today when in the latest monthly update for the month of September, we find that what until a month ago was “merely” a record $346.4 billion in offshore central bank sales in the LTM period ending  August 31 has – one month later – risen to a new all time high $374.7 billion, or well over a third of a trillion in Treasuries sold in the past 12 months. 

Among the biggest sellers – on a market-price basis – not surprisingly was China, which in August “sold” $28 billion in US paper (the actual underlying number while different, as this particular series is adjusted for Mark to Market variations, will be similar), bringing its total to $1.157 trillion, the lowest amount of US paper held by Beijing since 2012.

It wasn’t just China: Saudi Arabia also continued to sell its TSY holdings, and in August its stated holdings (which again have to be adjusted for MTM), dropped from $93Bn to $89Bn, the lowest since the summer of 2014. This was the 8th consecutive month of Treasury sales by the Kingdom, which held $124 billion in TSYs in January, and has since sold nearly 30% of its US paper holdings.

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Eyewitness: “97% of the Indian economy is cash-based. With 88% of all outstanding currency no longer usable, the economy is coming to a standstill.”

Panic In India As Gold Price Skyrockets After Currency Ban (AM)

I went to convert my banned banknotes into new ones. The largest amount one can have converted is Rs 4,000 ($60), until further notice. There was a huge rush of people at the bank. Arguments were erupting, as people refused to stand in queues and the banks gave no explanation of what needed to be done. Fights were breaking out. Amid the chaos I finally learned that there were three queues I had to go through in a sequence. I had to get a form from one counter, which I had to fill in with my name and address, my ID card details, the serial numbers of all the bills I wanted to exchange, and my cell-phone number. At the second counter, I then had to present the completed form along with a photocopy of my ID card. I had to sign on the photocopy which an official then stamped.

With my banknotes, the form and the photocopy of my ID card, I then went to the next queue to get my currency converted at a third counter. The whole process took about two hours. For most people in the busier parts of the cities, it took much longer.Anyone who thinks that a country which wastes two hours of every citizen’s life to convert his own $60 can ever hope to be an economic power is drinking too much Kool-Aid and cannot do primary level math. Forget any possibility of removing unaccounted for money or reducing corruption, what Modi is doing is a recipe for the destruction of whatever legitimate economy there is. That same afternoon, I went to the post office with a friend who wanted to get his money converted. After waiting a long time there, we found out that the post office had run out of cash.

Since then most ATMs have had limited amounts of cash available and banks keep running out of cash as well. The queues have continued to grow. People start lining up late into the night waiting for banks to open and still have to go back home with no cash. What started with two hours of queuing is becoming an endless slog now. Half of India’s citizens do not have a bank account and around 25% do not even have an ID card. These are the country’s poorest people, who have no way of converting their money – even if they learn how to do it, which is already a nigh insurmountable hurdle. Also, those who are old, disabled or sick have no choice but to suffer, for without personally visiting a bank branch office, one cannot convert one’s banknotes. 97% of the Indian economy is cash-based. With 88% of all outstanding currency no longer usable, the economy is coming to a standstill.

The daily-wage laborer, who leads a hand-to-mouth existence in a country with GDP per capita of a mere $1,600, no longer has work, as his employer has no cash to pay his wages. His life is in utter chaos. He is not as smart as Modi — despite the fact that Modi has no real life experience except as a bully and perhaps in his early days as a tea-seller at a train-station. He has no clue where his life is headed from here. These people are going hungry, and some have begun to raid food shops. People are dying for lack of treatment at hospitals. Old people are dying in the endless queues. Some are killing themselves, as they are unable to comprehend the situation and simply don’t know what to do. There are now hundreds of such stories in the media.

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There are now voices that claim Modi used the measure to deprive oppositon parties of their campaign cash. Elections coming up in a key state.

Modi May Need Six More Months to Replace India’s Junk Banknotes (BBG)

For Indians expecting respite from the government’s clampdown on cash, here’s a reality check: it probably won’t come soon. Prime Minister Narendra Modi’s administration may need until May 2017 to replenish the stock of now worthless bills, according to Saumitra Chaudhuri, an economist who advised Modi’s predecessor. The government on Nov. 8 banned 500 ($7.5) and 1,000 rupee notes in a surprise move against graft and tax evasion. Delays in replacing the currency risk prolonging the pain in the $2 trillion economy, where about 98 percent of consumer payments are made in cash. Deutsche Bank predicts the crunch could easily shave off a half-point from India’s growth in October-December, which could imperil its position as the world’s fastest-growing major market.

This is how Chaudhuri reached his conclusion, which he published in a blog post on the Economic Times’ website: Extrapolating from central bank data, he estimates that Modi’s move sucked out about 16.6 billion notes of the 500-denomination, and 6.7 billion 1,000-rupee bills. That means more than 23 billion notes totaling 15 trillion rupees. Modi intends to replace these with new 2,000-rupee and 500-rupee bills. However, Bharatiya Reserve Bank Note Mudran Pvt., which prints the higher denomination currency, has a stated capacity of just 1.3 billion notes a month. That’s with working double shifts. Raise this to triple shifts and it becomes 2 billion bills, which means it will need until the end of 2016 to replenish in value the 1,000-rupee notes.

Security Printing & Minting Corporation of India Ltd., whose capacity Chaudhuri estimates at 1 billion pieces a month, will need several more months to meet the 500-rupee target, even if it joins forces with BRBNM, he said. “Ergo, currency shortages will remain with us for many months and economic contraction will rule this period,” he wrote. “At the end of the period, confidence will be at new lows and recovery will take time.” In what could make matters worse, the presses – busy with the new bills – have almost completely stopped printing 100-rupee notes, Bloomberg Quint reported Wednesday citing central bank sources it didn’t name. These bills are the bread-and-butter of India’s $780 billion informal economy, which employs more than 90 percent of the workforce.

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“..at the next NATO summit, in the spring of 2017, and Secretary General Jens Stoltenberg had planned to extend a hearty welcome to the new US president, Hillary Clinton.” “..even the female English pronouns “she” and “her” had crept into internal written correspondence..”

NATO Prepares for Trump Presidency (Spiegel)

Everything had been so perfectly planned. Construction of the new NATO headquarters building near the Brussels Airport, a giant glass-and-steel structure to house the world’s most powerful military alliance in the future, will have cost more than €1 billion ($1.07 billion) by the time it opens next year. The mammoth building was supposed to be officially dedicated at the next NATO summit, in the spring of 2017, and Secretary General Jens Stoltenberg had planned to extend a hearty welcome to the new US president, Hillary Clinton. At least that’s how officials at NATO headquarters planned it. Anything else seemed unthinkable. So unthinkable that even the female English pronouns “she” and “her” had crept into internal written correspondence to refer to the future occupant of the White House.

But there will be no female president. Instead of Clinton, a reliable partner and good, old acquaintance in many trans-Atlantic circles, Donald Trump will be coming to Brussels – the same man who described the alliance as “obsolete” in his campaign. If he even comes, that is. Fearing that Trump won’t even attend the NATO summit, only a few weeks after his inauguration, the alliance has postponed the event. A meeting of NATO leaders without the presence of the American president, after all, would be a signal of its decline. Now organizers are envisioning a date next summer, in the hope that, by then, Trump will have recognized that the United States will also need NATO in the future. There are enormous doubts that this will happen. Consternation over the election of Donald Trump as the next US president is especially great within the Brussels alliance.

[..] In their most favorable scenario, the NATO strategists assumed that the new US president would only strictly insist that the Europeans spend more money on their security. During the campaign, after all, Trump left no doubt that he intends to radically change burden sharing within the Western alliance. One of Trump’s closest advisers, General Mike Flynn, the former head of US military intelligence, told SPIEGEL in an interview in July that, when it comes to money, Trump will pay little attention to the carefully tended harmony in the alliance. “We have to have these alliances going forward and see who’s going to pay for them,” Flynn said. He added that “NATO as a political alliance does need to be relooked at in terms of everything, (including) resourcing and capabilities,” soon after Trump’s administration takes office.

At the 2014 NATO summit in Wales, the member states agreed to a goal of spending 2% of their national GDP on defense. But few countries are currently meeting that goal. Germany, the second-strongest economy in the alliance, next to the United States, spends only 1.19% of its GDP on defense. Trump is now threatening to make the mutual defense commitment under Article 5 dependent on fulfilling this goal, or even to increase the%age. For Germany, 2% would already signify a dramatic increase in the defense budget, from about €34 billion today to roughly €65 billion. In any case, NATO officials are preparing themselves for growing demands on the Europeans. “Europe has no other choice: It has to strengthen the European column in NATO,” says EU foreign policy expert Alexander Graf Lambsdorff, a member of the pro-business Free Democratic Party.

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Global trade again. Plummeting exports and imports across Asia.

Singapore’s Recession Risk Rises As October Exports Show 12% Decline (R.)

Singapore’s exports in October shrank more than expected as sales to major markets fell, with those to Europe contracting sharply and raising risks of a recession in the trade-dependent economy. Non-oil domestic exports (NODX) skidded 12% last month from a year earlier, the trade agency International Enterprise Singapore said in a statement on Thursday, far worse than the median forecast of a 3.5% decline in a Reuters poll. In September, overseas shipments slumped a revised 5% on-year though the decline in sales to China slowed. On a month-on-month, seasonally adjusted basis, exports decreased 3.7% in October, missing a forecast of a 1% slide in the survey. Exports to the EU contracted 28.6% last month from a year earlier, compared with 9.9% growth in September. Contraction in sales of pharmaceuticals, non-electric engines & motors, as well as personal computers led the decline in October.

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It’s not even a black swan. I’ve warned of this risk for a long time. Without constructing bubble upon bubble, and without the shadow system that finances them, China has a long way to fall.

China Civil War Is the Real Black Swan (RV)

TL Tsim has studied the Chinese political scene since the 1980s, with a background in journalism, including the South China Morning Post and Hong Kong Economic Journal before starting his own consultancy. In an interview with Real Vision TV he said the greatest misconception among its people is that Chinese dynasties are super stable structures that last a long time. That’s not really the case, he argued, because none of them lasted longer than the Habsburgs in Austria, who ruled for over 800 years. The last one in China – the Qing dynasty – lasted 260 years, which is much shorter in comparison. People also underestimate the length of the civil wars between Chinese dynasties, which can last for 150 years, he adds. “That is something most Chinese people do not understand. And it has a bearing on the way we go forward,” Tsim said.

“In spite of all of the intelligence, the learning, and the experience of the Chinese people over 5,000 years, they have not come up with a system of government which can deal with the effective and peaceful transfer of power. In the West, you do it through the ballot box. So Brexit is Brexit. You accept it. But in China, the fight goes on.” The shortest dynasty of any size and power in Chinese history was the Yuan dynasty, which lasted just less than 100 years, Tsim said. “This government, this administration, the Chinese Communist Party, came to power in 1949. And so it’s been around for 67 years. “We don’t know when something like the Russian collapse, the implosion of the former Soviet Union might take place. We don’t know whether this is going to be the Yugoslavian model, when the country broke up into six or seven parts. So to speculate on the timing of it is something I do not do.“

But it is not idle to speculate on how this is going to happen. The most likely scenario is a power struggle over-spilling into a coup d’etat and then over-spilling into civil war. That would be the trajectory.” The real concern for Tsim – and he said for the Chinese leaders as well– is that if you look at the breakup of the former Soviet Union, the problem was internal, arising out of disagreements within the center of the party itself. [..] “And sadly, I think we’re not going to see a Yugoslavian model either, because there they did have a civil war. But the civil war– the war was small, in terms of size and scale, and didn’t last very long. That is not the Chinese model either. The Chinese model is a bitter, long-standing civil war– very destructive, very divisive. This is the real black swan.”

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I know many people won’t like to, but I would recommend reading at least part of this very long expose. How racist is Trump? And how do you know?

You Are Still Crying Wolf (Scott Alexander)

Back in October 2015, I wrote that the media narrative of Trump as “the white power candidate” and “the first openly white supremacist candidate to have a shot at the Presidency in the modern era” were being fabricated out of thin air. I said that “the media narrative that Trump is doing some kind of special appeal-to-white-voters voodoo is unsupported by any polling data”, and predicted that: “If Trump were the Republican nominee, he could probably count on equal or greater support from minorities as Romney or McCain before him.” Well, guess what? The votes are in, and Trump got greater support from minorities than Romney or McCain before him. You can read the Washington Post article, Trump Got More Votes From People Of Color Than Romney Did, or look at the raw data.

Trump made big gains among blacks. He made big gains among Latinos. He made big gains among Asians. The only major racial group where he didn’t get a gain of greater than 5% was white people. I want to repeat that: the group where Trump’s message resonated least over what we would predict from a generic Republican was the white population. Nor was there some surge in white turnout. I don’t think we have official numbers yet, but by eyeballing what data we have it looks very much like whites turned out in equal or lesser numbers this year than in 2012, 2008, and so on. The media responded to all of this freely available data with articles like White Flight From Reality: Inside The Racist Panic That Fueled Donald Trump’s Victory and Make No Mistake: Donald Trump’s Win Represents A Racist “Whitelash”.

I stick to my thesis from October 2015. There is no evidence that Donald Trump is more racist than any past Republican candidate (or any other 70 year old white guy, for that matter). All this stuff about how he’s “the candidate of the KKK” and “the vanguard of a new white supremacist movement” is made up. It’s a catastrophic distraction from the dozens of other undeniable problems with Trump that could have convinced voters to abandon him. That it came to dominate the election cycle should be considered a horrifying indictment of our political discourse, in the same way that it would be a horrifying indictment of our political discourse if the entire Republican campaign had been based around the theory that Hillary Clinton was a secret Satanist. Yes, calling Romney a racist was crying wolf. But you are still crying wolf.

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But today’s headlines are all about unemployment reaching 11-year lows. Makes you wonder, doesn’t it?!

One In Three UK Working Families Struggle To Pay Energy Bills (G.)

One in three working families struggle to pay their energy bills, it has been claimed, as pressure mounts on suppliers to do more to help poorer households move on to the cheapest deals. 29% of families do not put on the heating even when the house is cold, said comparison website uSwitch, while two-thirds fear cutting their energy use to save money will affect their family’s health. “It’s appalling that even families in work are struggling to pay their energy bills,” said uSwitch’s energy expert, Claire Osborne. “Suppliers must play their part by doing all they can to help their customers move to their best deal.” The energy regulator, Ofgem, backed calls for suppliers to alert customers to cost-saving schemes such as the warm home discount (WHD).

The initiative forces firms with more than 250,000 customers to offer a £140 discount to low-income pensioners and other vulnerable groups, though it has been criticised for long delays in delivering the reduction. “We want suppliers to engage more actively with customers, particularly those on standard variable tariffs, to help them get a better deal,” said an Ofgem spokesperson. This week the business minister criticised energy companies amid claims they were profiteering from deals that do not offer good value. “Customers who are loyal to their energy supplier should be treated well, not taken for a ride, and it’s high time the big companies recognised this,” Greg Clark said. “I have made clear to the big firms that this can’t go on and they must treat customers properly or be made to do so.”

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I’ll keep saying that a basic income for only parts of a society -as the pilot is set up- is doomed to fail.

Canadian Province To Give Every Citizen $1,320 Basic Income (Ind.)

A Canadian province is to run a pilot project aimed at providing every citizen a minimum basic income of $1,320 a month. The provincial government of Ontario confirmed it is holding public consultations on the $25m (£15m) project over the next two months, which could replace social assistance payments administered by the province for people aged 18 to 65. People with disabilities will receive $500 more under the scheme, and individuals who earn less than $22,000 (£13,000) a year after tax will have their incomes topped up to reach that threshold. The pilot report was submitted by Conservative ex-senator Hugh Segal, who suggested the project should be tested on three distinct sites: in the north, south and among the indigenous community of Ontario.

Areas with high levels of poverty and food insecurity should be chosen for the test project, Mr Segal recommended. “It is in fact the precinct of rational people when looking to encourage work and community engagement and give people a floor beneath which they’re not allowed to fall,” he said. “We can do this for seniors without having to add any more bureaucrats or civil servants, we respect their freedom to choose, we give them the money, they decide what’s important. Why would we treat other poor people differently? “What Ontario is doing is saying let’s have a pilot project, let’s calculate the costs, let’s calculate the positive and the nudge effects behaviourally.” Mr Segal confirmed that participation in the project, which is due to launch in spring 2017, will be voluntary and promised “no one would be financially worse off as a result of the pilot”.

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he can defend it all he wants, but defending the past shows you are blind to the present.

Obama Defends Globalization On Germany Visit (BBC)

US President Barack Obama has made a strong defence of globalisation as he arrived in Germany on his final visit to Europe before leaving office. In a joint article, Mr Obama and German Chancellor Angela Merkel said that with the global economy developing faster than ever, co-operation was vital. Mr Obama arrived in Germany from Athens where he had warned of threats to modern democracy. He is seeking to calm unease following the election of Donald Trump. In the article in the business magazine, Wirtschaftswoche (in German), he and Mrs Merkel made a strong case for international trade in contrast to Mr Trump’s more protectionist stance. “There will be no return to a world before globalisation,” they wrote. “We owe it to our companies and our citizens, indeed to the entire world community, to broaden and deepen our co-operation.”

The two leaders voiced support for the proposed Trans-Atlantic Trade and Investment Partnership (TTIP) between the US and the EU. By contrast, Mr Trump is a fierce critic of global free trade agreements and welcomed the UK’s decision in June to leave the EU. In Athens, Mr Obama acknowledged that globalisation had created a “sense of injustice” and a “course correction” was needed to address growing inequality. “When we see people, global elites, wealthy corporations seemingly living by a different set of rules, avoiding taxes, manipulating loopholes… this feeds a profound sense of injustice,” he told Greek leaders. Mr Obama’s visit to Greece was marked by street protests by leftist groups which denounced US “imperialism”. Police used tear gas against about 2,500 demonstrators who had tried to reach the city centre on Tuesday. The US president will stay in Germany until Friday and then head to Peru.

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But the words were again empty.

Athens Clings To Obama’s Words As Focus Shifts To Berlin (Kath.)

Greece on Wednesday hailed the support expressed by outgoing US President Barack Obama for debt relief for the country even as the latter arrived in Berlin for talks with German Chancellor Angela Merkel, whose country has consistently resisted restructuring Greece’s debt burden. Government spokesman Dimitris Tzanakopoulos expressed “satisfaction” with Obama’s references to the crucial issues of debt, the refugee crisis and Cyprus. “The US president made clear that austerity cannot lead to economic prosperity,” he said. Asked why an intervention by Obama in favor of Greek debt relief now that he is on his way out of the presidency should make a difference, Tzanakopoulos said that the situation in Europe is now very different and there is a shift against austerity.

“There is a very good possibility that by the end of the year we will have very positive developments as regards the Greek debt,” Tzanakopoulos said, noting that Athens was on course for a Eurogroup meeting on December 5. The spokesman described Obama’s visit as “an event of global significance” while sources indicated that the outgoing president had been “very friendly” to Prime Minister Alexis Tsipras. Earlier in the day, Obama delivered a stirring speech at the Stavros Niarchos Foundation Cultural Center, exalting the virtues of democracy and ancient Greece’s contribution to the modern world. “I came here with gratitude for all that Greece – ‘this small, great world’ – has given to humanity through the ages,” Obama said, referring to Aeschylus, Euripides, Herodotus, Thucydides, Socrates and Aristotle.

Obama took advantage of the speech to highlight the democratic values he sought to honor while in office and implicitly prodded his Republic successor Donald Trump to do the same. He also emphasized his respect for Greece’s efforts to respond to Europe’s refugee crisis despite its own problems. “Because our democracies are inclusive, we’re able to welcome people and refugees in need to our countries. And nowhere have we seen that compassion more evident than here in Greece,” he said.

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“Whoever says ‘we will relieve your debts’ is doing Greece a disservice..”

Schaeuble Crushes Greek Debt Relief Hopes that Obama May Have Sowed (GR)

U.S. President Barack Obama’s visit to Greece raised fresh hopes for debt relief that German Finance Minister Wolfgang Schaeuble rushed to quash. He said late on Tuesday that granting Greece its debt relief would not be helping the country, describing such a move as a “disservice.” A German Finance Ministry spokesman confirmed that Schaeuble had indeed made this statement, but that it was not in direct response to Obama’s visit to Greece. “Whoever says ‘we will relieve your debts’ is doing Greece a disservice,” said Schaeuble, according to the report by the daily newspaper, Passauer Neue Presse. His comments are not surprising bearing in mind that Germany has long supported the notion that no immediate debt relief is needed for Greece as this would discourage structural reforms.

“We have noted that President Obama has pointed to the importance of debt relief. The euro group agreed in May on a timetable on exactly that subject, regarding measures for the short term, and later in 2018 for mid-term measures,” said German government spokesman Steffen Seibert at a news conference. He added that Obama’s visit had not changed Germany’s position on the matter, during a government news conference. Seibert added that Obama’s view that austerity on its own does not create growth is a viewpoint that reflects that of the German government, adding that two things needed for long-term growth are a sustainable budget and the need for structural reforms.

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Think Obama went to see them?

Share of Greek Children At Risk Of Poverty Rises To 37.8% (Kath.)

More than a third, or 37.8%, of children aged up to 17 in Greece were at risk of poverty and social exclusion in 2015, compared to 28.7% in 2010, according to a report published by the European Statistics Agency (Eurostat). This means that they were living in households with at least one of the following characteristics: at-risk-of-poverty after social transfers (income poverty), severely materially deprived or with very low work intensity. The increase, which took the total number of children at risk of poverty and social exclusion in Greece to 710,000, is the largest in the European Union since 2010. After Greece, Cyprus was the country with the highest rise since 2010, with 7.1%.

At the same time, the EU average dropped from 27.5% in 2010 to 26.9% in 2015, which corresponds to the alarming figure of approximately 25.26 million children. Greece was third in the EU in the total number of children faced with such a predicament, behind Romania at 46.8% and Bulgaria at 43.7%. Hungary was fourth at 36.1%, ahead of Spain at 34.4% and Italy at 33.5%. The lowest rates were recorded in the Scandinavian countries, with Sweden at 14%, ahead of Finland and Denmark, with 14.9% and 15.7% respectively.

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At some point you may want to wonder if it’s a bug or a feature of the system.

Drowning Deaths In Mediterranean Already 20% Higher Than All Of Last Year (G.)

About 240 people are suspected to have drowned this week in four separate incidents in the Mediterranean, raising the total annual death toll to an unprecedented 4,500. Deaths in the Mediterranean are now nearly 20% higher than last year’s total of 3,771, which was the previous annual record. About 130 asylum seekers are missing after a rubber boat capsized on Sunday night, while another 100 are thought to have drowned on Tuesday night in a separate incident, the UN refugee agency said. Up to 10 people died in two further tragedies in recent days, bringing the death toll this week to at least 240.

In the accident on Sunday 15 survivors were left in the water for 10 hours, clinging on to a piece of a capsized boat, before being rescued by an oil tanker. Nine are still in hospital, Iosto Ibba, a spokesman for UNHCR, said in a phone call. Migration between Turkey and Greece has lessened significantly since March, after Turkey agreed to re-admit people deported from Greece. But crossings between Libya and Italy continue unabated. More than 165,000 people have reached Italy so far this year from north Africa, and the final annual total is likely to surpass the previous record of 170,000.

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Oct 282016
 
 October 28, 2016  Posted by at 9:11 am Finance Tagged with: , , , , , , , , ,  Comments Off on Debt Rattle October 28 2016
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Theodor Horydczak Washington Monument 1933


China Capital Flight Flashes Warning As Authorities Prick Property Bubble (AEP)
Unacceptable Cures for the Days Ahead (Dent)
Japan Consumer Prices Keep Falling, Household Spending Slips (BBG)
Bank of Japan Loses Bark And Bite Under Humbled Kuroda (R.)
The Gap Between Poor And Rich Regions In Europe Is Widening (Economist)
Xi Jinping Becomes ‘Core’ Leader Of China (R.)
Waking Up in Hillary Clinton’s America (Nomi Prins)
Donald Trump Has Won, Even If He Loses The US Election (Malmgren)
Why Is the Foreign Policy Establishment Spoiling for More War? (Kucinich)
Assange First Interview Since Being Censored (JJ)
Wither Democracy (Lessig)
Calais Children Abandoned At Former ‘Jungle’ Camp Site (EuO)

 

 

“The worry is a “negative feedback loop between a weakening yuan and capital flight”.

China Capital Flight Flashes Warning As Authorities Prick Property Bubble (AEP)

Capital outflows from China are accelerating. The hemorrhage has reached the fastest pace since the currency panic at the start of the year. The latest cycle of credit-driven expansion has already peaked after 18 months. Beijing has had to slam on the brakes, scrambling to control property speculation that the Communist authorities themselves deliberately fomented. How this episode could have happened is astonishing, given that premier Li Keqiang has warned repeatedly that excess credit is becoming dangerous and will ultimately doom China to the middle income trap. It will be clear by early to mid 2017 that the economy is rolling over and that the underlying ‘quality of growth’ has deteriorated yet further. “We think the recovery will run out of steam early next year,” said Chang Liu from Capital Economics.

This stop-go rotation – an all-too familiar pattern – coincides with an incipient liquidity squeeze in global finance as dollar LIBOR and Eurodollar rates ratchet upwards. A rate rise by the US Federal Reserve will clinch it. Since the commodity rebound is in great part driven by demand for Chinese industry and construction – and by a touching belief that China’s economy will sail majestically through 2017 – this looming slowdown spells trouble. Stress is already visible in the capital account. Morgan Stanley estimates that net outflows reached $44bn in September. Capital Economics thinks the figure was closer to $55bn, led by a surge in purchases of off-shore securities through the Shanghai-Hong Kong Stock Connect Scheme.

This does not yet match the capital flight seen late last year when a mismanaged shift in exchange rate policy set off outflows averaging $70bn a month, and triggered the global equity rout of January and February. But it is nearing a neuralgic threshold for currency traders. Beijing is clearly alarmed. Nikkei’s Yusho Cho reports that the authorities have ordered banks in Shanghai and Guangzhou to restrict access to foreign currency, and have imposed a “gag order” to keep it quiet. Institutions must now justify why they need foreign exchange. The worry is a “negative feedback loop between a weakening yuan and capital flight”. The central bank (PBOC) spent roughly $50bn defending the yuan last month, but this has not stopped the exchange rate sliding to 6.77 against the dollar – the weakest in six years.

The PBOC has burned through $800bn of foreign reserves since mid-2014, when they peaked at $4 trillion. It still has ample fire-power but bond sales automatically tighten China’s internal monetary policy since it is hard to sterilize the effect, and tightening may the last thing they want if the economy is slowing hard next year. “Our view is that the RMB (yuan) will depreciate 20pc against the US dollar to 8.1 by the end of 2018 as deflation of the property bubble leads to more capital outflows,” Zhiwei Zhang from Deutsche Bank. “This is deflationary for global trade.”

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Velocity of money is the no. 1 Deflation indicator.

Unacceptable Cures for the Days Ahead (Dent)

Then Dr. Lacy Hunt took the stage… As I was telling Boom & Bust subscribers in their 5 Day Forecast email on Monday, he’s the only economist (outside of Steve Keen from Australia, who’s currently in hibernation in London) that I recommend you to follow. He’s classically trained and deeply knowledgeable, and goes beyond the theoretical nature of his chosen field. He understands how debt and financial bubbles build and deleverage, a rarity among economists today. And he has possibly the best explanation of money velocity. Basically, it’s a sign of how productive investment in the economy is. Productive investment creates more profits, jobs and expansion, and hence, greater M2 velocity. Speculation, stock buybacks or empty buildings do not. His money velocity chart was my favorite of the conference.

With this single chart, Lacy shows the level and falling trends for money velocity across the U.S., Europe, Japan and China. And as you can see, the most unproductive investment is in China! See, solid proof from perhaps the most competent economist in America! Building stuff for no one isn’t productive for the economy. This is the most concrete proof yet of something that should be obvious. Despite 6-10% growth rates, China’s money velocity is even lower than Japan’s most dismal “coma economy” that is surviving solely on endless QE as they age and see exponential growth in debt levels… Do you get this? China is worse than Japan when you reflect the truth of money velocity. You can also see why we are the best house in a bad neighborhood. Our money velocity, despite continually slowing since 2000, is 50% stronger than the euro and three times that of Japan and China.

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The end of Abenomics nears..

Japan Consumer Prices Keep Falling, Household Spending Slips (BBG)

Japan’s consumer prices fell for a seventh straight month and household spending slumped again in September, underscoring the challenges Prime Minister Shinzo Abe and Bank of Japan Governor Haruhiko Kuroda face in trying to revive the world’s third-largest economy. The downbeat inflation and spending data came despite an increasingly tight labor market. The unemployment rate slipped to 3% in September, equal to the lowest since 1995. The low jobless figure hasn’t yet resulted in significant wage gains, a key element of efforts to reflate Japan’s economy.

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…and that is also the end of Kuroda.

Bank of Japan Loses Bark And Bite Under Humbled Kuroda (R.)

As his term winds down, Bank of Japan Governor Haruhiko Kuroda has retreated from both the radical policies and rhetoric of his early tenure, suggesting there will be no further monetary easing except in response to a big external shock. In a clear departure from his initial “shock and awe” tactics to jolt the nation from its deflationary mindset, he has even taken to flagging what little change lies ahead, trying predictability where surprise has failed. This new approach will be on show next week, when the BOJ is set to keep policy unchanged despite an expected downgrade in forecasts that could show Kuroda won’t hit his perpetually postponed 2% inflation target before his five-year term ends in April 2018. “The days of trying to radically heighten inflation expectations with shock action are over,” said a source familiar with the BOJ’s thinking. “No more regime change.”

Kuroda told parliament last week that while the BOJ might again stretch the timing for its inflation target, he saw no need to ease at the Oct. 31-Nov. 1 policy meeting. “There may be some modification to our forecast that inflation will hit our 2% target during fiscal 2017,” he said, the first time he has offered hints on upcoming projections. In the past, the market has learned to expect the unexpected. In 2013, when the BOJ deployed its massive asset-buying program, dubbed “quantitative and qualitative easing” (QQE), his shock therapy boosted stocks and weakened the yen. Further surprises came with an expansion of QQE in October 2014, and then the switch to negative rates early in 2016, which he had denied was an option just days before. But the law of diminishing returns bought him less bang for each buck.

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Nice research, the graph shows hoe German data hide the sinking of Europe. Quite poorly reported, though.

The Gap Between Poor And Rich Regions In Europe Is Widening (Economist)

The beautiful but rubbish-strewn streets of Catania, Sicily’s second-biggest city, are a world away from swanky Trento, in the country’s richer north. About a quarter of Sicilians are “severely materially deprived”—meaning that they cannot afford things like a car, or to heat their home sufficiently—compared with just 5% in Trento. Italy is not unique. In many places, the divide within countries appears to be getting worse. According to an analysis by The Economist, the gap between richer and poorer regions of euro-zone countries has increased since the financial crisis. Our measure of regional inequality looks at the average income per head of a country’s poorest region, expressed as a%age of the income of that country’s richest part. The weighted average for 12 countries shows that regional inequality was declining in the years leading up to the financial crisis of 2007-08, but has increased since then (see chart).

The poorest area in Slovakia, the euro zone’s most geographically unequal economy, now has an income per person of just 28% of the richest, a slight fall from before the crisis. In Calabria, Italy’s poorest region, income per person as a share of the country’s best-off part, the province of Bolzano, was 45% in 2007 but is only 40% now. Elsewhere poor regions of the euro zone have seen income falling in both relative and absolute terms. An exception is Germany: in its once-communist east, excluding Berlin, GDP per person reached 67% of that in former West Germany last year. (Most of the catch-up took place in the early 1990s, but continues more slowly.) Deindustrialisation is partly to blame. Most of the euro zone’s 19 members have fewer manufacturing jobs than in 2008.

Manufacturing employment is high in many of Europe’s poorer countries, but they have lost international competitiveness in part because of an overvalued euro. Tight public spending also plays a role. Since 2008 the number of civil servants in the euro zone has fallen by about 6%. This has often hurt needy regions most. Cuts in welfare benefits also hit harder. A paper by Luca Agnello, Giorgio Fazio and Ricardo Sousa, three economists, found that austerity led to higher regional inequality in 13 European countries between 1980 and 2008. This suggests that the problem will continue: public funds will be tight for years to come, while weak public spending on education and infrastructure will crimp future growth. Even if the euro zone starts to grow strongly again, the geographical scars will be plain to see.

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China will be calling out loud for a strong leader as its economy grinds to a halt.

Xi Jinping Becomes ‘Core’ Leader Of China (R.)

China’s Communist party has given the president, Xi Jinping, the title of “core” leader, putting him on par with previous strongmen Mao Zedong and Deng Xiaoping, but signalled his power would not be absolute. A lengthy communique released after a four-day meeting of senior officials in Beijing emphasised the importance of collective leadership. The system “must always be followed and should not be violated by any organisation or individual under any circumstance or for any reason”, the party said. But all members should “closely unite around the central committee with comrade Xi Jinping as the core”, said the document, released through state media. The core leader title marks a significant strengthening of Xi’s position before a key party congress next year, at which a new standing committee, the pinnacle of power in China, will be constituted.

Since assuming office almost four years ago, Xi has rapidly consolidated power, including heading a group leading economic change and appointing himself commander-in-chief of the military, though as head of the central military commission he already controlled the armed forces. While head of the party, the military and the state, Xi had not previously been given the title “core”. Deng coined the phrase “core leader”, and said he, Mao Zedong and Jiang Zemin were core leaders, meaning they had almost absolute authority and should not be questioned. Xi’s immediate predecessor, Hu Jintao, was never called the “core”. The plenum meeting paves the way for a congress, held every five years, in autumn 2017, at which Xi will further consolidate his power and which could indicate who may replace him at the 2022 congress.

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Nomi’s very mild and polite.

Waking Up in Hillary Clinton’s America (Nomi Prins)

To date, $10 trillion worth of assets sits on the books of the Big Six banks. Since 2008, these same banks have copped to more than $150 billion in fines for pre-crisis behavior that ranged on the spectrum of criminality from manipulating multiple public markets to outright fraud. Hillary Clinton has arguably taken money that would not have been so available if it weren’t for the ill-gotten gains those banks secured. In her usual measured way, albeit with some light admonishments, she has told them what they want to hear: that if they behave – something that in her dictionary of definitions involves little in the way of personalized pain or punishment – so will she.

So let’s recap Hillary’s America, past, present, and future. It’s a land lacking in meaningful structural reform of the financial system, a place where the big banks have been, and will continue to be, coddled by the government. No CEO will be jailed, no matter how large the fines his bank is saddled with or how widespread the crimes it committed. Instead, he’s likely to be invited to the inaugural ball in January. Because its practices have not been adequately controlled or curtailed, the inherent risk that Wall Street poses for Main Street will only grow as bankers continue to use our money to make their bets. (The 2010 Dodd-Frank Act was supposed to help on this score, but has yet to make the big banks any smaller.)

And here’s an obvious corollary to all this: the next bank-instigated economic catastrophe will not be dealt with until it has once again crushed the financial stability of millions of Americans. The banks have voted with their dollars on all of this in multiple ways. Hillary won’t do anything to upset that applecart. We should have no illusions about what her presidency would mean from a Wall Street vs. Main Street perspective. Certainly, JPMorgan Chase CEO Jamie Dimon doesn’t. He effectively endorsed Hillary before a crowd of financial industry players, saying, “I hope the next president, she reaches across the aisle.” For Wall Street, of course, that aisle is essentially illusory, since its players operate so easily and effectively on both sides of it. In Hillary’s America, Wall Street will still own Main Street.

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“Reality TV Land will immediately install itself in the Oval Office if he wins. Then, anything goes.”

Donald Trump Has Won, Even If He Loses The US Election (Malmgren)

Donald Trump has already won the US presidential election and Hillary Clinton has already lost it, even if she emerges with the title of commander-in-chief. It is already apparent that Trump will not skulk off the global stage. Nor will he have to. Consider what happens if he loses the presidential race. He will most likely launch a reality TV show that will undoubtedly attract a record number of viewers. From this ridiculously unconstrained and lucrative perch, he’ll relentlessly attack President Clinton, the Republican Party and the Democratic Party alike. In retrospect, it will be clear that his entire campaign was a trailer for the blockbuster show that follows. In this way he will continue to influence, if not dominate, public opinion.

[..] he won’t go away. Neither will the forces that swept him to the top of politics: the anger, the loss, the sense of unfairness, the inability of the traditional parties to deliver a better outcome for most Americans. Meanwhile, the expectation that a Clinton presidency could conquer these forces is also likely to be proved false. The Oval Office is a highly constrained place that limits the influence of its occupant especially in the face of broader political disarray. She can try and set the tone but the rest of the political establishment looks too dysfunctional, and largely unwilling, to be able to help her. Her presidency seems set to open with high expectations and low approval ratings. Trump, however, could move to the next phase of his career with low expectations and high TV ratings.

Both have faced threats of prosecution throughout this long and increasingly ugly campaign. But, does Trump care if the courts or the government put his tax returns or the sexual allegations against him to the test? He won’t. Will he care if his emails are leaked? No. The real “public prosecutor” for Trump is the Fourth Estate – the media. It will prosecute him just as relentlessly if he becomes commander-in-chief but probably with the same limited impact. Will it matter to Clinton if her emails, from the past or future, are displayed to the public? Will it matter if the Clinton Foundation faces further allegations of “crooked” behaviour? But, we live in the internet age. The real “public prosecutor” for Clinton is and will remain Julian Assange and Wikileaks. His sights will continue to be firmly set on her. He does not care about Trump and Trump doesn’t care about him. Once again, Trump wins.

Trump’s only real threat of looking like the loser comes if the polls are wrong and he ends up winning. Many wonder whether he really wants the job. After all, the Oval Office is the political equivalent of a straightjacket. In theory, Trump won’t be able to shoot words from the hip so freely once he is sitting in the big shiny chair with his finger on the literal and metaphorical button. But, Reality TV Land will immediately install itself in the Oval Office if he wins. Then, anything goes. In the meantime, he will “win” in his effort to redefine America’s political landscape. As president, it won’t matter to him if the House and Senate block him. He is not concerned with process. His job is to break down the traditional political establishment.

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“Any report advocating war that comes from any alleged think tank ought to be accompanied by a list of the think tank’s sponsors and donors..”

Why Is the Foreign Policy Establishment Spoiling for More War? (Kucinich)

The American people are fed up with war, but a concerted effort is being made through fearmongering, propaganda, and lies to prepare our country for a dangerous confrontation, with Russia in Syria. The demonization of Russia is a calculated plan to resurrect a raison d’être for stone-cold warriors trying to escape from the dustbin of history by evoking the specter of Russian world domination. It’s infectious. Earlier this year the BBC broadcast a fictional show that contemplated WWIII, beginning with a Russian invasion of Latvia (where 26% of the population is ethnic Russian and 34% of Latvians speak Russian at home). The imaginary WWIII scenario conjures Russia’s targeting London for a nuclear strike.

No wonder that by the summer of 2016 a poll showed two-thirds of UK citizens approved the new British PM’s launching a nuclear strike in retaliation. So much for learning the lessons detailed in the Chilcot report. As this year’s presidential election comes to a conclusion, the Washington ideologues are regurgitating the same bipartisan consensus that has kept America at war since 9/11 and made the world a decidedly more dangerous place. The DC think tanks provide cover for the political establishment, a political safety net, with a fictive analytical framework providing a moral rationale for intervention, capitol casuistry. I’m fed up with the DC policy elite who cash in on war while presenting themselves as experts, at the cost of other people’s lives, our national fortune, and the sacred honor of our country.

Any report advocating war that comes from any alleged think tank ought to be accompanied by a list of the think tank’s sponsors and donors and a statement of the lobbying connections of the report’s authors. It is our patriotic duty to expose why the DC foreign-policy establishment and its sponsors have not learned from their failures and instead are repeating them, with the acquiescence of the political class and sleepwalkers with press passes.

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“As I said it has long been our analysis that Hillary Clinton will win the election because she has all the establishments on her side..”

Assange First Interview Since Being Censored (JJ)

“Wikileaks is one of the fighting dogs that has a lot of energy and runs around fighting all the time. It is built to fight it loves nothing more than to fight. And so when my internet was cut off we had long ago made strategic contingency plans for exactly this situation. So despite bombs raining down on us from statements by high US officials, media and so on this is exactly the sort of situation we enjoy so there was not even one day pause. We just continued on publishing the next day even though I was cut off from my team.” “As I said it has long been our analysis that Hillary Clinton will win the election because she has all the establishments on her side and we can see it in terms of polling.

If someone like Donald Trump – who has a great many problems I’m sure all of you are aware of it – but if he managed to get up to the 48% or 50% level in the polling which he has just on two occasions across the different polls united, immediately those big media networks and the funders get together and smash him back down. So I don’t think there’s any chance of Donald Trump winning the election. That would probably be bad inside the United States. It would probably be good outside the United States. Even with the amazing material we have published and will continue to publish because even though we publish it and there’s a lot of people reading it on the internet directly, most of the media originations in the United States are very strongly aligned with Hillary Clinton.

Two reasons really, a lot of them are owned by big businesses which are owned by banks which like Hillary Clinton. And the other is a class reason. Most journalists and media workers are very middle class and Donald Trump represents in their minds, white trash. So to do anything that looks to be like it might be supporting Donald Trump looks like you’re supporting white trash. And to those rivals that they have within their class they are white trash. So it lowers their social status and that’s a very dangerous thing to do in an institution, to have your social status lowered, because someone might get your job or the job that you want to have within the institution. So there is a lot of conformity and fear around criticizing Hillary Clinton in any way at all and it reduces the impact of even very significant material that is being released.”

Read more …

Can Iceland give the world back its lost democracy?

Wither Democracy (Lessig)

On the eve of the Icelandic Elections… WITHER DEMOCRACY, by Professor Lawrence Lessig, speaking from the University of Iceland. Lessig explains how democracy has failed the US and other citizens of the world, and how Iceland is on the brink of implementing an entirely new and improved system, based on a PEOPLE’S CONSTITUTION. Yes, it’s a world first, but then Iceland was the first country ever to form a parliament. Lester Lawrence “Larry” Lessig III is an American academic, attorney, and political activist. He was the co-founder, with our beloved Aaron Swartz, of Creative Commons. He is the Roy L. Furman Professor of Law at Harvard Law School; and the former director of the Edmond J. Safra Center for Ethics at Harvard University.

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Our moral bankruptcy in all its splendor.

Calais Children Abandoned At Former ‘Jungle’ Camp Site (EuO)

Scores of children have been left out in the cold, after French authorities flattened the make-shift migrants camp in Calais, in northern France, earlier this week. Journalists report that around a hundred children were sleeping rough on the remains of the camp, among burned-out shacks and riot police. The Guardian spoke to children who had been lured off the camp site, with promises of being transferred to reception centres where their asylum claims would be assessed. Instead, riot police cornered the group while bulldozers razed the camp. Media and NGO reports of the children’s treatment triggered protests of British home secretary Amber Rudd, who told her French counterpart, Bernard Cazeneuve, on Thursday, that children remaining in Calais had to be properly protected.

Cazeneuve later issued a statement saying he was surprised by Rudd’s declaration. He said France had given shelter to 1,451 minors since 17 October recalling that Britain had a legal duty to take those children that have a link to the UK, for instance through family. 274 children have been allowed to travel to the UK in the last two weeks. The decision to clear the camp came from French president Francois Hollande, calling it a ”humanitarian emergency” during a visit in September. French authorities started evacuating the camp, also known as the Jungle, on Monday (24 October) and said they had relocated almost all of the 6,000 people estimated to have been living there to other parts of France. [..] British baroness Shas Sheehan, who has been working as a volunteer teacher in the camp prior to its dismantlement, accused France and the UK of human rights violations, pointing to official assurances by both sides that the site wouldn’t be demolished before all the children were safeguarded.

Read more …

Oct 212016
 
 October 21, 2016  Posted by at 9:43 am Finance Tagged with: , , , , , , , , , ,  Comments Off on Debt Rattle October 21 2016
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Lewis Wickes Hine Game of craps. Cincinnati, Ohio 1908

 

 

NICOLE FOSS is the keynote speaker tonight, October 21, at the

Community Solutions Conference
McGregor Hall, Antioch College
Yellow Springs, Ohio
7.30 pm

 

 


Dollar Near 7-Month High As Euro Slides, Asia Slips (R.)
Another Thing Trump, Hillary Get Wrong In This Election: The National Debt (F.)
Trump’s Candidacy – the Good and the Bad of It (Stockman)
China Property Prices Rise At Fastest Pace On Record In September (CNBC)
Yuan Hits Record Low Against Dollar in Offshore Trading (WSJ)
China’s Property Frenzy Spurs Risky Business (WSJ)
China’s Local Governments Are Getting Into The Venture Capital Business (BBG)
The Sharing Economy is Creating a Dickensian World (Das)
‘Lions Hunting Zebras’: Ex-Wells Fargo Bankers Describe Abuses (NYT)
Washington Foreign Policy Elites Not Sorry To See Obama Go (WaPo)
Hacking Democracy (ZH)
Italy Shields Russia From EU Sanctions Threat (EUO)
Draghi Says Athens Should Focus On Reforms, And The Eurozone On Debt (Kath.)
126,956 Greeks Work In Private Sector For €100 Per Month (KTG)

 

 

“The European Central Bank removed a source of immediate risk for traders by revealing that it did not discuss tapering its QE program at this month’s meeting..”

Dollar Near 7-Month High As Euro Slides, Asia Slips (R.)

Asian stocks were mostly lower on Friday as the dollar climbed to seven-month highs against a basket of currencies and dragged down crude oil prices, cooling investor risk appetite. The greenback was boosted by a fall in the euro after the ECB shot down talk it was contemplating tapering its monetary easing – sending the common currency to its lowest since March. MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.3%. South Korea’s Kospi lost 0.4% and Australian stocks shed 0.1%, weighed down by a retreat in energy shares. Singapore fell 0.4% while Shanghai added 0.3%. Japan’s Nikkei rose 0.3% , brushing a six-month high, as the yen weakened against the dollar.

U.S. stocks ended a choppy session on Thursday slightly lower as investors digested the latest round of earnings, with a sharp drop in telecoms offset by gains in healthcare. The ECB left its ultra-loose monetary policy unchanged on Thursday but kept the door open to more stimulus in December, with ECB President Mario Draghi dousing recent market speculation that the central bank may begin tapering its €1.7 trillion asset-buying program. “The European Central Bank removed a source of immediate risk for traders by revealing that it did not discuss tapering its QE program at this month’s meeting,” wrote Ric Spooner, chief market analyst at CMC Markets. “Decisions are being deferred until December pending the outcome of research – meaning that meeting will be a key focus for markets.”

Read more …

Debt explained in the vein of Steve Keen.

Another Thing Trump, Hillary Get Wrong In This Election: The National Debt (F.)

As if there aren’t enough things to be upset about as it is, here’s another: neither candidate’s position on the debt and the deficit makes economic sense (something they each reinforced in last night’s Las Vegas debate). If they act on their campaign promises, we will most certainly be facing an economic downturn, if not an outright disaster. 1. Public sector deficits must, by definition, be private sector surpluses. If one entity spends more than it earns (the public sector) then another must earn more than it spends (you and me). This is an inescapable accounting identity. 2. Public sector debt must, by definition, be a private sector asset. If one entity adds liabilities, another adds assets–another inescapable law of accounting. 3. It is impossible for a nation to be forced to default in debt denominated in its own currency. Not unlikely, not improbable, but impossible. This is not my opinion, it’s a fact, albeit a poorly known one.

4. U.S. public debt to foreign countries like China has nothing to do with the budget deficit. It’s a result of the trade deficit. The federal government’s budget could have been in surplus for the past 100 years, but whenever we buy more from China than we sell to them, they have leftover cash which they use to buy our financial assets. These may include but are not limited to Treasury Bills. No amount of budget balancing will affect debt to China. 5. The private sector cannot consistently generate sufficient demand to create jobs for everyone who wants one. As technology and productivity have increased, so it has become more difficult. Entrepreneurs cannot be blamed for adding self-checkout lanes, they have families and stockholders. But it means the store can sell the same volume of output with fewer employees–unemployment therefore rises.

Hence, we need the public sector to spend in deficit so that a.) the private sector can net save and b.) jobs are created to supplement those generated by the market system. And it creates neither a default risk nor inflation–unless we are already at full-employment, which means we don’t need to be spending that much in the first place! It is noteworthy that when, in the midst of the Great Depression, the government decided to try to reduce the deficit, unemployment jumped from 14% (after having fallen from nearly 25%) to 19%. Once WWII hit, however, any worries about government spending went right out the window and unemployment plummeted to 1.9%. There’s no reason we can’t be there right now. Only bad policy can stand in our way.

Read more …

Dave’s new book, Trumped, is out. “God help America if she becomes president.

Trump’s Candidacy – the Good and the Bad of It (Stockman)

America is heading for a devastating financial collapse and prolonged recession that will make the last go-round look tame by comparison. The entire recovery is one giant Potemkin village of phony economics and egregious financial asset inflation. It isn’t even a mixed or debatable story. Beneath the “all is awesome” propaganda of the establishment institutions is a broken system hurtling toward ruin. For example, during the month of July 2016, when the Democrats were convening in Philadelphia to confirm a third Obama term and toast 25-years of Bubble Finance, exactly 98 million Americans in the prime working ages of 25 to 54 years had jobs, including part-time gigs and self-employment. That compares to 98.1 million during July 2000. That’s right. After 16 years of the current regime we have 5 million more prime working age Americans and not a single one of them with a job.

At the same time, the number of persons in households receiving means-tested benefits has risen from 50 million to 110 million. Even as the economic wagon has faltered and become loaded with dependents, however, the financial system has grown by leaps and bounds. For example, during those same 16 years public and private debt outstanding in America has risen from $28 trillion to $64 trillion. The value of publicly traded equity has increased from $25 trillion to $45 trillion. And the net worth of the Forbes 400 has nearly doubled from $1.2 trillion to $2.4 trillion. In a word, the U.S. economy is a ticking time bomb. Main Street economics and Wall Street finance have become radically and dangerously disconnected owing to the reckless falsification of financial markets by the Fed and Washington’s addiction to endless deficits and crony capitalist bailouts and boodle.

There is not a remote chance that this toxic brew can be sustained much longer. Under those circumstances the very last thing America will need in 2017–18 when it hits the fan is a lifetime political careerist and clueless acolyte of the state who knows all the right words and harbors all the wrong ideas. Indeed, during the coming crisis America will need a brash disrupter of the status quo, not a diehard defender. Yet when the Dow index drops by 7,000 points and unemployment erupts back toward double digits, Hillary Clinton’s only impulse will be to double down. That is, to fire-up the printing presses at the Fed from red hot to white heat, plunge the nation’s fiscal equation back into multi-trillion deficits and crank-out Washington’s free stuff like never before.

A combination of a Clinton White House and the devastating day of reckoning just ahead would result in Big Government on steroids. It would also tilt the Imperial City toward war in order to distract the nation’s disgruntled voters in their tens of millions. Indeed, her prospective war cabinet — including Victoria Nuland and Michéle Flournoy — is comprised of the actual architects of Washington’s unprovoked NATO siege on Russia’s own doorsteps. God help America if she becomes president.

Read more …

And Beijing keeps pretending they want to cool it down.

China Property Prices Rise At Fastest Pace On Record In September (CNBC)

China property prices rose at the fastest pace on record in September, fueling fears of a market bubble in the world’s second-largest economy. Property prices climbed 11.2% on-year in September in 70 major cities while prices were up 2.1% from August, according to Reuters calculations using data from the National Bureau of Statistics. In August, prices rose 9.2% from a year ago. Home prices in the second-tier city of Hefei recorded the largest on-year gain at 46.8%, compared with on-year gains of 40.3% in August. Top August performer Xiamen posted an on-year rise of 46.5% against an increase of 43.8% in August. Prices in Shenzhen, Shanghai and Beijing rose 34.1%, 32.7% and 27.8% on an annual basis respectively, according to Reuters.

Underpinning the strong growth was simply “debt” said independent analyst, Fraser Howie, who is also co-author of “Red Capitalism” and “Privatizing China.” “A decade ago you could make a case for strong property in China (with) genuine demand and relatively low leverage in the sector. This is certainly not the case now. You are seeing a lot of leverage in the property sector, both retail and commercial,” he told CNBC’s “Squawk Box”. The quick gains in property prices in China came after the Chinese government introduced measures aimed at boosting home sales earlier this year to reduce large inventories in an effort to limit an economic slowdown. Recent fears of overheating, however, prompted local governments in China to announce a flurry of property market cooling measures in recent weeks. Any impact from those measures was not reflected in the latest data.

Despite the property cooling measures, Howie said the broad theme of how the Chinese government was responding to the situation was recurrent. “For five to six years or so, you have on-again-off-again cooling measures in the property market, trying to make property more affordable and it’s still nowhere near affordable,” he added. The Chinese government, he said, “has no clear plan”. “It’s just a bubble, they try to pull it back; they rein it in a bit, they let it go again when it impacts the real economy.”

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It’s gettiing time for the IMF to comment on this.

Yuan Hits Record Low Against Dollar in Offshore Trading (WSJ)

The yuan hit a record low against the U.S. dollar in offshore trading Friday after strong earnings on Wall Street and weakness in the euro boosted the strength of the greenback. The dollar reached a high of 6.75651 against the Chinese currency, which trades freely around the clock in offshore markets such as Hong Kong, its biggest trading center. It was last trading up 0.2% at 6.7582. The yuan has been traded outside China since 2010. Hong Kong’s markets are closed today as a typhoon lashes the city, with the yuan breaching its previous record around 7.41 a.m. local time, typically a time when market liquidity is thin. The People’s Bank of China later set its daily reference rate for the yuan traded in mainland China at 6.7558 against the U.S. dollar.

Onshore, the yuan is allowed to trade 2% either side of this level. The currency last traded at 6.7519 against the greenback, while its offshore counterpart weakened further after the fixing. “Overnight we saw a broadly stronger U.S. dollar,” says Qi Gao, Asia foreign exchange strategist at Scotiabank. He anticipates further strength in the greenback in the weeks running up to the U.S. Federal Reserve’s December meeting, at which the central bank may deliver its first rate increase in a year.

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“This is actually what we’re told by banks’ client managers to do to meet [regulatory] requirements.”

China’s Property Frenzy Spurs Risky Business (WSJ)

Xiong Meifang was about $30,000 short two months ago for a 30% down payment on an $895,000 apartment in the southern part of Beijing. To make up the difference, the 31-year-old graphic designer took out a line of credit from a national bank. She said the bank told her she could use the loan however she wanted. China bans borrowing for down payments. A surge in such financing offered by nonbank lenders earlier this year led to a regulatory clampdown. But as banks increasingly turn to mortgage lending, there are new signs of risky practices. In some instances, banks offer credit lines to borrowers buying apartments with few questions asked. In others, banks work with independent loan brokers or property agents to funnel money into down-payment financing.

Data released Tuesday showed medium- and long-term household loans, almost all of which are mortgages, made up 60% of all new loans created in the third quarter, up from 47% in the second quarter and 23% in the first. Easy credit has fanned a property-buying craze in many Chinese cities this year, helping shore up an otherwise weak economy. Government data on Wednesday showed GDP expanded by 6.7% from a year earlier in the third quarter, matching expectations, largely on the strength of the hot property market and loose monetary policies. In the past two weeks, two dozen cities have asked banks to tighten home-lending standards. Financial regulators are seeking to rein in the relatively new practice of banks working with brokers and others, such as developers, to help home buyers come up with down payments.

[..] On paper, the purpose of the loan can’t be for the home purchase itself. But the company could help arrange a contract with, say, a decorator, to show a bank that the loan would be for home decoration, the representative said, adding that ultimately the bank can’t check how the money is used. [The broker] charges a 3% flat fee on the amount of any loans it helps arrange. “It’s all legal, of course,” said the representative. “This is actually what we’re told by banks’ client managers to do to meet [regulatory] requirements.”

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While they have huge debts with the shadow banks. What could go worng?

China’s Local Governments Are Getting Into The Venture Capital Business (BBG)

China’s next billion-dollar startup could have backing from an investor with more money than Warren Buffett and a knack for promoting spicy duck-neck delicacies. The Hubei provincial government is armed with 547 billion yuan ($81 billion) earmarked for investments that can diversify a job base dependent on steel, mining and cars. And the bureaucrats in the heartland region along the Yangtze River are letting professionals do the work – allocating the money to investment houses Sequoia Capital, TCL Capital and CBC Capital. Local governments across China are getting into the venture-capital business, deploying a combined 3 trillion yuan as the Communist Party resolves to modernize the economy and reduce debt-fueled spending on infrastructure. The money is meant to spur development of biotechnology, internet and high-end manufacturing companies that can replace the stumbling heavy industries sapping economic growth.

“Our focus is more on the sector than the return,” said Wang Hanbing, who oversees $6 billion as chairman of the Yangtze River Industry Fund, one of several using Hubei government money. “We encourage people to bring real jobs back to Hubei.” China is grappling with a profusion of economic difficulties such as declining exports, surging home prices and skyrocketing corporate debt. The State Council signaled last month it had a bigger appetite for venture capital, urging local administrations to play a leading role and promising to level the playing field for foreign VC funds. Policy makers want to curb the proliferation of borrowing by regional authorities to pay for infrastructure projects that prop up growth. Local government financing vehicles borrow on behalf of governments, which often are barred from doing so. Through September, the debt issued by more than 1,600 such vehicles soared 47% from a year ago to 1.5 trillion yuan.

Read more …

The same effect as globalization: bring down wages..

The Sharing Economy is Creating a Dickensian World (Das)

Cheerleaders frame the sharing economy in lofty utopian terms: The sharing economy isn’t business but a social movement, transforming relationships between people in a new form of internet intimacy and humanitarianism. Exchanges are economic. Buyers are primarily concerned about access to services at low costs rather than social objectives. Providers are motivated by money, using their assets and labor to get by in an unforgiving and poor economic environment.

The major financial backers of the sharing economy aren’t philanthropists. They are Wall Street and Silicon Valley’s 1%, related venture-capital firms and a few institutional investors, such as sovereign-wealth funds. The amount of capital provided is substantial. Given the normal five-to-seven-year cycle for such investments, the pressure to deliver results will increase, bringing it into conflict with the social or altruistic objectives espoused. Ultimately, the sharing economy will influence how traditional businesses operate. Traditional automobile makers could offer a car-sharing service, such as BMW’s Drive Now. Users can access a car as needed, paying only for usage. These types of changes may decrease rather than increase revenue as it substitutes hiring arrangements for outright purchases.

But perhaps the real issue is that the sharing economy reverses progress in labor markets. Whatever the gains from increased efficiency, it recreates a Dickensian world for a part of the population. Formal employment protects labor from exploitation and deprivation to varying degrees. The sharing economy transfers the risk of economic uncertainty from the employer to the employee with potentially tragic consequences. Most important, the underlying economic premise is false. Consumption constitutes 60%-70% of activity in advanced economies. In 1914, Henry Ford doubled his workers’ pay from $2.34 to $5 a day, recognizing that paying people more would enable them to afford the cars they were producing. Reduction of income levels and employment security ultimately reduces consumption and economic activity, impoverishing most within societies.

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They should take the lot of them, everyone involved, and ban them from ever working in banking or finance again.

‘Lions Hunting Zebras’: Ex-Wells Fargo Bankers Describe Abuses (NYT)

Mexican immigrants who speak little English. Older adults with memory problems. College students opening their first bank accounts. Small-business owners with several lines of credit. These were some of the customers whom bankers at Wells Fargo, trying to meet steep sales goals and avoid being fired, targeted for unauthorized or unnecessary accounts, according to legal filings and statements from former bank employees. “The analogy I use was that it was like lions hunting zebras,” said Kevin Pham, a former Wells Fargo employee in San Jose, Calif., who saw it happening at the branch where he worked. “They would look for the weakest, the ones that would put up the least resistance.”

Wells Fargo would like to close the chapter on the sham account scandal, saying it has changed its policies, replaced its chief executive and refunded $2.6 million to customers. But lawmakers and regulators say they will not let it go that quickly, and emerging evidence that some victims were among the bank’s most vulnerable customers has given them fresh ammunition. This week, three members of the Board of Supervisors in San Francisco, Wells Fargo’s hometown, introduced a resolution calling on the city to cut all financial ties with the bank. They cited both the recent scandal and past cases — particularly the $175 million that Wells Fargo paid in 2012 to settle accusations that its mortgage brokers had discriminated against black and Hispanic borrowers.

Read more …

You may not like Trump, but do you like war any better?

Washington Foreign Policy Elites Not Sorry To See Obama Go (WaPo)

There is one corner of Washington where Donald Trump’s scorched-earth presidential campaign is treated as a mere distraction and where bipartisanship reigns. In the rarefied world of the Washington foreign policy establishment, President Obama’s departure from the White House – and the possible return of a more conventional and hawkish Hillary Clinton — is being met with quiet relief. The Republicans and Democrats who make up the foreign policy elite are laying the groundwork for a more assertive American foreign policy, via a flurry of reports shaped by officials who are likely to play senior roles in a potential Clinton White House. It is not unusual for Washington’s establishment to launch major studies in the final months of an administration to correct the perceived mistakes of a president or influence his successor.

But the bipartisan nature of the recent recommendations, coming at a time when the country has never been more polarized, reflects a remarkable consensus among the foreign policy elite. This consensus is driven by a broad-based backlash against a president who has repeatedly stressed the dangers of overreach and the need for restraint, especially in the Middle East. “There’s a widespread perception that not being active enough or recognizing the limits of American power has costs,” said Philip Gordon, a senior foreign policy adviser to Obama until 2015. “So the normal swing is to be more interventionist.” In other instances, the activity reflects alarm over Trump’s calls for the United States to pull back from its traditional role as a global guarantor of security.

“The American-led international order that has been prevalent since World War II is now under threat,” said Martin Indyk, who oversees a team of top former officials from the administrations of Obama, George W. Bush and Bill Clinton assembled by the Brookings Institution. “The question is how to restore and renovate it.”

Read more …

Very clear video. But then, it was of course always a stupid thing to claim that US elections cannot be rigged.

Hacking Democracy (ZH)

“Those who cast the votes decide nothing. Those who count the votes decide everything.” – Joe Stalin.

With the mainstream media lambasting Trump for daring to suggest the election process is rigged – despite hard evidence – this is the hack that proved America’s elections can be stolen using a few lines of computer code. The ‘Hursti Hack’ in this video is an excerpt from the feature length Emmy nominated documentary ‘Hacking Democracy’. The hack of the Diebold voting system in Leon County, Florida, is real. It was verified by computer scientists at UC Berkeley.

Read more …

Brussels is as crazy as the US Democrats.

Italy Shields Russia From EU Sanctions Threat (EUO)

Italy has shielded Russia and Syria from a threat of new sanctions, amid warnings by some leaders that Russia was trying to “weaken” the EU. EU leaders said in a joint statement in Brussels on Thursday (20 October) that: “The EU is considering all available options, should the current atrocities [in Syria] continue.” They also urged “the Syrian regime and its allies, notably Russia” to “bring the atrocities to an end”, referring to Russian and Syrian airstrikes on the city of Aleppo in Syria that have caused severe civilian casualties. Germany, France, and the UK had wanted to threaten sanctions more explicitly.

“The EU is considering all options, including further restrictive measures targeting individuals and entities supporting the regime, should the current atrocities continue”, they had suggested saying. Italian prime minister Matteo Renzi led opposition, also shared by some other states, to the threat, diplomats said. He said while leaving the summit that “if we want to speak with Russia then we have to leave the door open”. He also said he did not think “that the difficult situation in Syria could be solved by additional sanctions on Russia”.

Read more …

Europe has but one purpose: to humiliate Greece. Britain better watch out.

Draghi Says Athens Should Focus On Reforms, And The Eurozone On Debt (Kath.)

European Central Bank President Mario Draghi on Thursday called on the Greek government to focus its efforts on implementing reforms agreed with the country’s creditors, noting that the ECB will examine the issues of Greece’s debt sustainability and its possible involvement in the Central Bank’s quantitative easing program when the time is right. “Discussions on the sustainability of the Greek debt continued” at an ECB meeting earlier in the day, he said. “We expressed concern, and steps should be taken.” Draghi said the ECB will conduct its own independent assessment of Greece’s debt.

“When the time comes we will examine independently the issue of the debt sustainability,” Draghi said, adding that “until then it is premature to speculate and weave scenarios,” an apparent reference to Greek calls for inclusion in the ECB’s QE program. Draghi appeared to indicate that the ECB would proceed with its assessment of Greece’s debt once there has been action from both sides: work from Athens in implementing reforms and action from Greece’s eurozone partners in lightening its debt burden. The timing of Draghi’s comments was significant. They came a day before Greek Prime Minister Alexis Tsipras is to meet with German Chancellor Angela Merkel on the sidelines of an EU leaders’ summit in Brussels for talks that are expected to touch on Greece’s debt problem and the progress of reforms.

Read more …

As supermarket prices are as high as in the rest of Europe.

126,956 Greek Workers Earn €100 Per Month, 343,760 Between €100 and €400 (KTG)

When it comes to escape the nightmare of unemployment, one may grab all possible and impossible opportunities and even accept jobs with wages that let you come home with a loaf of bread, two tomatoes and a tiny piece of cheese. The data released by the Labor Ministry are shocking: 126,956 employees in the private sector are paid a gross monthly salary of €100. 343,760 employees are paid monthly salaries between €100 and €400 gross. This category of workers have part-time or rotating work contracts. Working time: 2-3 days per week or even a few hours a week. €100 per month gross could be €55-60(?) net – enough to cover transport cost and make a living at €1 per day. PS a friend recently got a job for €300 gross – net should be around €250-230. Working hours are 4 hours per day, four days per week. She has been jobless for 4 years.

Read more …

Oct 142016
 
 October 14, 2016  Posted by at 9:20 am Finance Tagged with: , , , , , , , , , ,  Comments Off on Debt Rattle October 14 2016
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Lewis Wickes Hine Newsies in St. Louis, N. Broadway and De Soto. 1910


Fed Creates Junk Bond And Stock Market Bubble (SA)
Draghi Sends Corporate Yields So Negative the ECB Can’t Buy Them (BBG)
There’s No Plateau in a Housing Bubble, Not Even in Canada (WS)
30% Junk Rally Gives Traders Heartburn (BBG)
China’s Tough Choice: Supporting Growth Or Controlling Debt (CNBC)
China Export Dip Tempts Policy Makers to Keep Weakening Yuan (BBG)
Shanghai Banks Told To Limit Loans To Property Developers (R.)
Standard & Poor’s Warns On UK Reserve Currency Status As Brexit Hardens (AEP)
Hundreds Of Properties Could Be Seized In UK Corruption Crackdown (G.)
Some of Donald Trump’s Economic Team Diverge From Candidate (WSJ)
Renzi Gambles All on Referendum Haunted by Weak Italian Economy (BBG)
Walloon Revolt Against Canada Deal Torpedoes EU Trade Policy (Pol.)
Germany Proposes North Africa Centers For Rescued Migrants (AFP)

 

 

“..this borrowing to fund buybacks and dividends doesn’t last this long and it has never lasted three years..”

Fed Creates Junk Bond And Stock Market Bubble (SA)

The chart below emphasizes the point that real business investment has declined while commercial and industrial loans are increasing. The leverage in the system is the highest ever as cheap money is not going to the right places. Businesses will only invest in new initiatives if they see sales growth in the future. Low interest rates will not cause a manager to invest in a new initiative. However, managers are still tempted to take the free money, so they pile it into the easiest place: dividends and buybacks.

As you can see, the total payout ratio of dividends and buybacks has exceeded 100% for the past two years. Usually, this borrowing to fund buybacks and dividends doesn’t last this long and it has never lasted three years, so leverage is near its brink.

The chart below shows how levered the balance sheets of corporations are. The leverage on investment-grade balance sheets is at a record high. The three bubbles that you can see in the chart below have all been created by the Federal Reserve’s easy money policies.

Read more …

Super Clueless Mario surprises himself.

Draghi Sends Corporate Yields So Negative the ECB Can’t Buy Them (BBG)

The European Central Bank is starting to price itself out of the corporate-bond market as yields plumb such lows that some notes are no longer eligible for its purchase program. ECB President Mario Draghi’s unprecedented buying of corporate debt has sent borrowing costs tumbling to a record and now yields on some securities are so low they fall outside the ECB’s own criteria. Yields on bonds from Paris’s public transport network have already dropped below the threshold of minus 0.4%, while those from Siemens, Europe’s biggest engineering company, France’s train operator SNCF and Sagess, which manages the nation’s strategic oil reserves, are also approaching the cut-off point.

The increasingly negative yields are raising questions about how much more the ECB can do in credit markets to stimulate growth. Yields on €2.6 trillion ($2.9 trillion) of government bonds in Europe have already turned negative after the central bank bought €1.3 trillion of fixed-income assets, including €32 billion of corporate bonds. “This is a sign of how much impact corporate bond buying has had on the credit market,” said Barnaby Martin at Bank of America. “If corporate yields continue to fall, then conceivably it could impact the ECB’s ability to buy bonds. It’s surprising how quickly we’ve reached this situation.”

Read more …

“When a bubble pops, the first thing that stops is transactions..”

There’s No Plateau in a Housing Bubble, Not Even in Canada (WS)

Once enough people are priced out of the housing market, demand collapses. This would normally be where housing bubbles deflate in a very painful manner for lenders, homeowners, and everyone getting their cut, including governments and the real estate industry. But there has been a strong influx of mostly Chinese investors that need to get their money, however they obtained it, out of harm’s way at home, and they pile into the market, and they don’t care what a property costs as long as they think they can sell it for more later. But British Columbia threw a monkey wrench in to the calculus this summer when it adopted a 15% real estate transfer tax and other measures aimed squarely at non-resident investors. It hit home, so to speak.

Total sales in Vancouver plunged 32.5% in September from a year ago, with sales of detached homes falling off a cliff – down 47%. Home sales have fallen every month since their all-time crazy peak in February on a seasonally adjusted basis, for a cumulative decline of 44%, according to Marc Pinsonneault, Senior Economist at Economics and Strategy at the National Bank of Canada. But home prices have not yet fallen, he wrote in the note, “because market conditions have just started to loosen from the tightest conditions on records. We see home price deflation starting soon (10% expected over twelve months).” His chart shows the plunge in sales (red line, left scale, in thousands of units) even as active listings have started to rise (blue line, right scale):

In Toronto, the opposite is happening, with sales spiking on a seasonally adjusted basis way past prior record levels, even as new listings have plunged.

For now, “Toronto is now the red hot market,” explains Pinsonneault: “Home sales broke records in each of the last three months. But the historically low supply (in terms of the number of homes listed for sale) is also contributing to market conditions that are the tightest on records.” But the situation can turn on a dime, as Vancouver demonstrated. When a bubble pops, the first thing that stops is transactions. This happens suddenly. Sellers refuse to cut their prices, while buyers refuse to step up to the plate. Things grind to a halt.

Once sellers are forced to relent on price, transactions start rolling again, at lower prices, and each lower price, due to the metrics of comparable sales, pressures down future prices of other transactions. Once Chinese investors figure out that they’re likely to lose a ton of money in Canadian real estate, because their compatriots who’ve piled into the market before them have already lost a ton of money, they’re going to lose their appetite. This is the hot money. It evaporates suddenly and without a trace. As Vancouver shows, bubbles don’t end in a plateau.

Read more …

Chasing yield doesn’t look like the best way forward.

30% Junk Rally Gives Traders Heartburn (BBG)

It’s becoming difficult to see how the lowest-rated U.S. junk bonds can continue to rally. They’ve posted their best performance since 2009, with more than a 30% return so far this year. And now investors from Goldman Sachs Asset Management to Highland Capital are starting to become nervous about this debt, and with good reason: If there’s any sort of economic shock at all, these notes are poised to lose a lot. And some sort of shock is entirely possible in the near future. These notes have benefited from two overwhelming factors this year:

1) New stimulus efforts in Japan and Europe have pushed investors into the most-speculative notes, especially those in the U.S.

2) Oil prices have rallied from the lows reached earlier this year, giving some highly indebted energy companies more time to survive after seeing their corporate lives flash before their eyes last year.There are signs that both dynamics are reaching their limits.Central bankers in Europe and Japan are running out of ways to stimulate their economies after deploying negative-rate policies that are eroding the stability of their financial systems. Instead of trying to add stimulus, policy makers in both regions are being forced to tweak existing bond-buying programs to keep them viable. And oil prices have rallied, but not as much as energy junk bonds, which have gained more than 49% since the end of February. This has propelled gains on the broader high-yield market.

[..] current prices aren’t high enough to sustain the current momentum in these bonds. That’s because a “significant amount” of the lowest-rated unsecured bonds of energy companies are pricing in oil at $70 a barrel over the longer term, Jefferies analyst Michael Carley said. Taking a step back, why should the lowest, most-leveraged junk bonds continue to do well? This debt should do best when an economy is steadily growing, interest rates are low and companies have bright futures. But U.S. companies are facing an earnings recession, the Federal Reserve is poised to raise rates again within the next few months and companies are borrowing at a faster pace than they’re increasing their incomes.

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The choice China refuses to make; they do both and run only to move backwards.

China’s Tough Choice: Supporting Growth Or Controlling Debt (CNBC)

China’s economic transition has caused a problem for the government—how to avert a sharp slowdown while keeping a lid on ballooning debt. In a report Thursday, rating agency Standard and Poor’s highlighted the “tough choice between supporting growth and controlling debt sustainability” as China tries to find new ways to fund public investments. “Although aggregate and provincial GDP growth stabilized in the first two quarters of 2016, we believe the fiscal conditions of Chinese local governments are under more pressure given the weakened economy,” S&P analysts wrote in a report. The rising debt pile of local government financing vehicles (LGFV) raised questions on credit risks, said S&P.

“As long as investments remain a growth impetus, it is very hard to shift away from the old public financing model to weaken the LGFVs’ role in public investment,” said S&P credit analyst, Xin Liu. “The growing pile of LGFV debt will add to the fiscal vulnerability of local governments, which already rely on these financing vehicles to execute public investment mandates,” she added. S&P’s warning on local government debt comes amid concerns about overall debt levels in the country as the world’s second-largest economy begins to slow after years of boisterous growth. Corporate debt is also under focus. In another report released on Tuesday, S&P warned that the “unabated growth” of China’s corporate debt could cost the country’s bank “dearly”.

It said the current growth rate of China’s debt “is not sustainable for long”. S&P said if the growth in debt doesn’t slow, the ratio of problem credit to total credit facing China’s banks could triple to 17% by 2020. The banks may then need to raise fresh capital of up to 11.3 trillion Chinese yuan ($1.7 trillion), which is equivalent to 16% of China’s 2015 nominal GDP. The Bank of International Settlements warned recently excessive credit growth in China will increase the country’s risk of a banking crisis in the next three years.

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A plunging reserve currency. What’s not to like?

China Export Dip Tempts Policy Makers to Keep Weakening Yuan (BBG)

China’s renewed export weakness is coinciding with a clampdown on surging home prices and corporate debt, stoking expectations policy makers will allow further yuan depreciation to buffer the economy. Exports in September dropped the most since February amid anemic global demand (-10%), while imports declined 1.9%, leaving a $42 billion trade surplus. Analysts at Bank of America, RBC and Capital Economics estimate further depreciation for the yuan, already near a six-year low. With S&P Global Ratings and the International Monetary Fund among those warning about the threats from rapid credit expansion, policy makers risk cooling the economy with new property restrictions. But their plan for economic growth of at least 6.5% this year leaves little room for maneuver.

The upshot: a weaker yuan is needed to support an industrial sector that’s returning to profitability as it emerges from four years of deflation. “China is running out of options and letting the yuan go is the lowest-cost option for them,” said Sue Trinh, head of Asia FX strategy at RBC Capital Markets in Hong Kong. “We’ve seen them move in this direction. There’s more work to do.” The yuan is headed for the biggest weekly decline since January as mainland markets returned from holiday to face intensified depreciation pressures from a rising dollar. The yuan has dropped 3.4% against the dollar this year, the biggest decline in Asia. While depreciation’s not helping exporters in dollar terms, it cushions the blow when their shipments are counted in local currency terms, underpinning a recovery in industrial profits.

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What’s Chinese for whack-a-mole?

Shanghai Banks Told To Limit Loans To Property Developers (R.)

Banks in China’s financial hub Shanghai have been asked by authorities to limit loans to property developers for land purchases and to scrutinize would-be borrowers suspected of trying to access mortgages by getting divorced, the Shanghai Daily reported on Friday. The steps were the latest in a string of measures around the country to try to cool a property market seen at risk of overheating. Quoting unidentified commercial bankers, the newspaper said banks were told that housing developers should pay at least 30% down on residential projects instead of relying on bank loans.

It said some developers had put only 10% down on projects and raised the remaining funds through bank and gray-market loans. Banks were also asked to reject mortgage applications of people who had divorced within three months, it quoted an internal filing from a Shanghai-based rural commercial bank as saying. A property price rally has prompted a home buying frenzy in parts of China, in some cases prompting couples to get divorced to circumvent buying restrictions and invest in multiple homes. Police last month detained seven property agents in Shanghai for spreading rumours of plans for a new government regulation that caused a rash of divorces and a rush to buy new homes.

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More cause for finger pointing.

Standard & Poor’s Warns On UK Reserve Currency Status As Brexit Hardens (AEP)

Britain is in danger of misreading the political landscape in Europe and faces the possible loss of its reserve currency status if it fails to secure full access to the European single market, Standard & Poor’s has warned. The powerful US rating agency said the British government is treading into hazardous waters in negotiations with the EU and is risks serious damage to economy’s future growth trajectory, with long-term implications for the debt profile and the country’s credit-worthiness. S&P fears that loss of unfettered access to the single market would have incalculable consequences for business, yet the Government so far appears almost insouciant about this.

“There seems to be this view that ‘we’re a big important economy, the Europeans export a lot to us, so they have got to give us what we want’, but is that really true?” said Ravi Bhatia, the director of sovereign ratings in charge of Britain. “Individually most of these countries don’t export that much to the UK, and were seeing a hardening of attitudes,” he said. Mr Ravi said Britain has limited scope for a spree on infrastructure projects and is walking a fine line on budget policy. “Before Brexit, the trajectory was planned fiscal consolidation, but we’re no longer certain we’re going to see that,” he said. “If they ramp up fiscal spending they’ll get a stimulus and that is good in one way as it will help boost growth, but they have to finance that spending; it will raise the deficit, and the debt stock is already high,” he told the Daily Telegraph.

Standard & Poor’s stripped Britain of its AAA status immediately after the Brexit vote in June, slashing the rating by two notches to AA, although the move was well-flagged in advance. It described the vote as seminal event that would lead to a “less predictable, stable, and effective policy framework in the UK”. The agency will issue its next verdict at the end of this month. Any further downgrade at this delicate juncture would be more serious, amounting to a red card on the Government’s hard-nosed rhetoric and negotiating tactics It is unprecedented for a AAA state to lose three notches in a matter on months.

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First they invite them in…

Hundreds Of Properties Could Be Seized In UK Corruption Crackdown (G.)

Hundreds of British properties suspected of belonging to corrupt politicians, tax evaders and criminals could be seized by enforcement agencies under tough new laws designed to tackle London’s reputation as a haven for dirty money. Huge amounts of corrupt wealth is laundered through the capital’s banks. The National Crime Agency believes up to £100bn of tainted cash could be passing through the UK each year. Much of it ends up in real estate, and in other assets such as luxury cars, art and jewellery. The criminal finances bill, published on Thursday, is designed to close a loophole which has left the authorities powerless to seize property from overseas criminals unless the individuals are first convicted in their country of origin.

It will introduce the concept of “unexplained wealth orders”. The Serious Fraud Office, HM Revenue and Customs and other agencies will be able to apply to the high court for an order forcing the owner of an asset to explain how they obtained the funds to purchase it. The orders will apply to property and other assets worth more than £100,000. If the owner fails to demonstrate that a home or piece of jewellery was acquired using legal sources of income, agencies will be able to seize it. The law targets not just criminals, but politicians and public officials, known as “politically exposed persons”. Depending on how quickly it passes through parliament, the bill could come into force as early as spring 2017.

“There are some hundreds of properties in the UK strongly suspected to have been acquired with the proceeds of corruption,” said the campaign group Transparency International, which has been pressing for the new measures. “This will provide low-hanging fruit for immediate action by law enforcement agencies, if those agencies are properly resourced.”

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Whaddayaknow? The WSJ has a Trump story that’s not about genitals. Surrounding yourself with people who don’t agree with you is often not a bad sign.

Some of Donald Trump’s Economic Team Diverge From Candidate (WSJ)

Advisers concede there is a tug-of-war between the supply-siders and the protectionists, but Mr. Kudlow said he saw similar disagreements in the White House as a budget official for President Ronald Reagan. And Mr. Navarro, whose trade skepticism closely reflects Mr. Trump’s public views, said the campaign is “very much united” on trade. When Mr. Navarro ran for Congress two decades ago, Hillary Clinton, then the first lady, campaigned at one of his San Diego rallies. “Pure serendipity—sweet manna from heaven,” he wrote in a book recounting the campaign. He sought to oust the Republican incumbent by making the race a referendum on then-GOP House Speaker Newt Gingrich. Last month, Mr. Navarro flew with Messrs. Trump and Gingrich to a rally in Fort Myers, Fla. He now says he was “seduced” by the Clintons and “over time, that seduction has turned into betrayal and ultimately disbelief.”

Other top advisers include David Malpass, a Reagan administration official, who as chief economist of Bear Stearns in 2007 dismissed concerns that the housing sector would take the economy into a recession, let alone cause the financial crisis that brought down his bank. When he first met Mr. Trump before a rally in an airplane hangar at Dallas’ Love Field last year, conservative economist Stephen Moore pushed back against Mr. Trump’s invitation to join the campaign. “I can’t work for you because I’m free trade, and I know you’re more of a protectionist,” Mr. Moore recalled saying. Mr. Trump said they could “agree to disagree on that issue,” Mr. Moore said. Advisers say Mr. Trump’s decision to hire people he doesn’t fully agree with shows maturity. “Hillary is more like the red army, with everyone marching in lockstep,” said Mr. Kudlow.

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No. 1 concern in Berlin and Brussels.

Renzi Gambles All on Referendum Haunted by Weak Italian Economy (BBG)

Italians are about to have their say on Prime Minister Matteo Renzi and the economy isn’t doing him any favors. When the country holds a referendum on a key constitutional change Dec. 4, many voters will have more than “Yes” or “No” on their mind. They’ll probably take the opportunity to vent their frustration over the snail’s pace of growth after the latest recession. [..] All but one of Italy’s main polling firms signaled this month that “No” will prevail in the referendum, with surveys saying on average that the reform will be rejected by 52.2% of voters, up from 50.4% in September. To make things potentially worse for Renzi, just three days before the vote, Italians will learn whether the recovery resumed after stalling in the three months through June, when the national statistics office publishes its final reading of third quarter GDP.

“We might go to the polling stations in the wake of a negative GDP figure,” said Alberto Bagnai, who teaches economics at Gabriele d’Annunzio University in Pescara. “That could have a direct impact on the vote.” While recent industrial data have exceeded expectations, confidence among households and executives about the outlook is not very optimistic. Renzi himself acknowledged that economic concerns might influence voters and has tried to reassure them. Last week, the premier and his Finance Minister Pier Carlo Padoan repeatedly defended the government’s above-consensus target of 1% growth next year. The central bank called the goal “very optimistic” – a code phrase signaling difficulties ahead.

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A sorrowful bunch.

Walloon Revolt Against Canada Deal Torpedoes EU Trade Policy (Pol.)

The EU’s once-mighty trade negotiators never dreamed that their powers would be stripped from them so unceremoniously – and possibly for good. The Francophone parliament of the Federation of Wallonia-Brussels – only 10 minutes’ walk from EU headquarters — stands to win a place in history for sinking the EU’s landmark trade deal with Canada and potentially for scuppering the European Commission’s ability to lead the world’s biggest trade bloc for many years. Failure to conclude the Comprehensive Economic and Trade Agreement (CETA) by this month’s deadline would be a devastating blow to the EU, which has spent seven years working on the tariff-slicing agreement with Ottawa.

“It’s crazy. If we allow a regional parliament to block a trade deal that will benefit the whole EU, where does this lead us to?” said Christoph Leitl, president of the Global Chamber Platform, a worldwide alliance of business chambers. “CETA is not just a deal with Canada, it has model character for Europe’s future trade relations.” The Federation of Wallonia-Brussels parliament, which focuses on the cultural and educational concerns of 4.5 million French speakers in Belgium, voted Wednesday evening to reject CETA because of worries about public services and agriculture. [..] Unless the Belgian central government can find an imaginative compromise quickly, the EU will be unable to corral the signatures of all 28 EU countries before an EU-Canada summit on October 27.

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German efficiency. Send them where you can’t see them.

Germany Proposes North Africa Centers For Rescued Migrants (AFP)

Migrants rescued at sea should be taken to centers in north Africa where their claims for asylum in EU countries can be studied, German interior minister Thomas de Maiziere proposed Thursday. De Maiziere made the suggestion as he arrived for a Luxembourg meeting of EU interior ministers who are trying to slow the migrant flow from Libya to Italy after a March deal with Turkey sharply reduced the influx to Greece, the main entry point for Europe last year. “People who are rescued in the Mediterranean should be brought back to safe accommodation facilities in northern Africa,” de Maiziere told reporters. “Their need for protection would be verified and we would put into place a resettlement to Europe with generous quotas, fairly divided between the European countries,” the minister said.

“The others have to go back to their home countries,” he added. EU countries, confronting populist opposition to refugees, have long feuded over quotas for relocating asylum seekers from Greece and Italy as well as for resettling people from refugee camps. De Maiziere did not mention a specific country in north Africa but EU officials have been discussing efforts to curb the migrant flow with Libya, the main transit point for African migrants heading to Europe. However, Libya’s new national unity government last week rejected calls from some EU countries to build refugee camps on its shores, saying the bloc could not “shirk its responsibility” while it struggled to restore peace and stability.

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Encore.

There’s No Plateau in a Housing Bubble, Not Even in Canada (WS)

Canadian house prices jumped 11.7% in September from a year ago, according to The Teranet–National Bank National Composite House Price Index released today. But the index papers beautifully over the dynamics in each metro. In six of the 11 metro markets of the index, prices have been languishing or even declining over the past couple of years, as they’ve hit the wall of reality after often stupendous price gains in the prior decade: Montreal, Calgary, Edmonton, Quebec City, Halifax, and Ottawa-Gatineau. In the two largest markets – Toronto and Vancouver, which combined account for 54% of the index – prices have blown through the roof. Both markets are among the hottest, most over-priced housing bubbles in the world.

UBS recently ranked Vancouver Number 1 globally on that honor roll. But suddenly the dynamics have changed. Vancouver’s housing market is in turmoil, to use a mild word, as sales have crashed, after the implementation of a real-estate transfer tax this summer by British Columbia, aimed squarely at non-resident investors. In Vancouver, those investors are mostly Chinese. And where do these folks now go to inflate prices? Toronto. Still, the national house price index (red line, right scale), after the 11.7% jump over the past 12 months (blue columns, left scale), has doubled since 2005!

The index, similar to the Case-Shiller Home Price index in the US, is based on repeat sales. It looks at properties that sold at least twice over the years to establish “sales pairs.” It then uses a proprietary formula to deduct price changes from these transactions and extrapolate them into an index for each of the 11 markets and nationally. It’s not perfect, but it offers an alternative view to median prices or Canada’s “benchmark” prices. Prices in Toronto have been spiking (red line, right scale), with double-digit year-over-year%age gains (blue columns, left scale) so far this year, including a breath-taking 16% in September.

Vancouver makes Toronto look practically tame. Vancouver went completely crazy, with year-year-over price gains reaching 26% in the summer. Now a new reality went into effect. Market activity has collapsed, as no one knows what anything is worth, with buyers and sellers jockeying for position. And on a monthly basis, the index was essentially flat (+0.2%):

Most Canadians have not seen their incomes rise anywhere near the rate of the house price inflation of the past many years, if their incomes rose at all. Thus, many of them have been priced out of the housing market, or have access to it only via highly risky financing schemes that put both lenders and borrowers at risk, despite historically low interest rates. Once enough people are priced out of the housing market, demand collapses. This would normally be where housing bubbles deflate in a very painful manner for lenders, homeowners, and everyone getting their cut, including governments and the real estate industry. But there has been a strong influx of mostly Chinese investors that need to get their money, however they obtained it, out of harm’s way at home, and they pile into the market, and they don’t care what a property costs as long as they think they can sell it for more later.

Read more …

Oct 132016
 
 October 13, 2016  Posted by at 8:39 am Finance Tagged with: , , , , , , , , ,  2 Responses »
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G. G. Bain 100-mile Harkness Handicap, Sheepshead Bay Motor Speedway, Brooklyn 1918


China September Exports Plunge 10%, Imports Down 1.9% (R.)
Wave Of China Property Tightening Hits Home Sales During Holiday Week (R.)
Chinese Firms Unveil Debt Swaps As Beijing Struggles To Reduce Leverage (R.)
US Mortgage Applications Down 6%, Rates Rise (CNBC)
Where Will All the Money Go When All Three Market Bubbles Pop? (CHSmith)
If Europe Insists On A Hard Brexit, So Be It (AEP)
Brexit Means Whatever The EU Says It Means (Luyendijk)
ECB Says Greece Needs Clarity on Debt to Regain Market Access (BBG)
Steve Keen: A Renegade Economist Has A Plan For Reducing Global Debt (RV)
Pension Benefits In Tiny California Town Slashed As ‘Ponzi Scheme’ Exposed (ZH)
Dumped Apartment Projects ‘Groundhog Day’ To Global Financial Crisis (NZ Herald)
Wells Fargo CEO John Stumpf Steps Down, Walks Away With $120 Million (WSJ)
Moscow Officials Told To Immediately Bring Back Children Studying Abroad (ZH)
Putin Ally Tells Americans: Vote Trump Or Face Nuclear War (R.)
“We Are At War And You Are The Front-line Troops In This War” (I’Cept)
The Global Seed And Chemical Industry Is Undergoing A Rapid Realignment (BBG)
Monsanto Dismisses ‘People’s Tribunal’, ‘Moral Trial’ As A Staged Stunt (G.)
Cut Funds To EU States That Turn Away Refugees, Italy Urges (R.)

 

 

All you need to know about the state of world trade.

China September Exports Plunge 10%, Imports Down 1.9% (R.)

China’s September exports fell 10% from a year earlier, far worse than expected, while imports unexpectedly shrank 1.9% after picking up in August, suggesting signs of steadying in the world’s second-largest economy may be short-lived. That left the country with a trade surplus of $41.99 billion for the month, the General Administration of Customs said on Thursday. Analysts polled by Reuters had expected imports to rise 1%, after unexpectedly advancing 1.5% in August for the first time in nearly two years on stronger demand for coal as well as other commodities such as iron ore which are feeding a construction boom.

Exports had been expected to fall 3%, slightly worse than in August as global demand for Asian goods remains stubbornly weak. Analysts had expected the trade surplus to expand to $53 billion in September from August’s $52.05 billion. The September import reversal raises questions over the strength of the recent recovery in domestic demand, Julian Evans-Pritchard at Capital Economics said in a note after the data. “The data we have so far suggests that a drop in import volumes of a number of key commodities, including iron ore and copper, are partly responsible,” he said.

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Xi continues to do two opposite things: blow bubbles and deflate them at the same time. My guess is there’s a time limit on that game.

Wave Of China Property Tightening Hits Home Sales During Holiday Week (R.)

A wave of restrictions imposed on housing markets in major Chinese cities last week have unnerved some buyers and developers, cutting the area of new homes sold in places such as Beijing and Shenzhen by more than half. More than 20 cities have imposed measures, including higher mortgage downpayments, to cool hot property markets that have raised official alarm in Beijing and fresh concerns about China’s ballooning debt. Last week was a public holiday to mark National Day, traditionally a high season for property sales. Property agents said prices of new homes sold in the southern city of Shenzhen and in Beijing dropped 20% last week to entice buyers, compared with the previous week.

“The new tightening measures are quite stringent,” said Alan Cheng, general manager of realtor Centaline Shenzhen. “It’s a blow to confidence and people are worried that prices will drop, so they are observing from the sidelines now.” The latest restrictions varied from city to city, but included higher mortgage downpayments for second and third-time home buyers, in a bid to stem the flow of cash into the red-hot property market. China’s home prices rose 9.2% in August from a year earlier, official data shows. But in Shenzhen, they increased almost 37%, in Beijing more than 23% and in Shanghai topped 30%. Such hefty price rises have been common all year in these so-called Tier 1 cities. The rally has prompted a frenzy among some buyers. In some cases, couples divorced to find a way around buying restrictions.

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How to make debt go away. Transfer it from state-owned firms to state-owned banks. Yeah, that should work..

Chinese Firms Unveil Debt Swaps As Beijing Struggles To Reduce Leverage (R.)

Chinese firms are moving rapidly to announce debt restructuring plans following the release of government guidelines on Monday, as policymakers experiment with ways to rein in the country’s ballooning corporate debt. China Construction Bank, the nations’ second-largest lender by assets, has been reported in two deals to help big, debt-laden state companies in as many days, and other Big Four banks are expected to follow soon. Chinese companies sit on $18 trillion in debt, equivalent to about 169% of GDP, according to the most recent figures from the Bank for International Settlements. Most of it is held by state-owned firms. Construction Bank will conduct a debt-to-equity swap with Yunnan Tin Group, the world’s biggest tin producer and exporter, to cut its debt and financing costs, Xinhua reported on Wednesday.

Separately, the bank on Tuesday announced the launch of a 24 billion yuan ($3.60 billion) debt restructuring fund to help struggling Wuhan Iron and Steel. Although the statement from CCB did not specify the planned operations of the fund, official media reported that the debt reduction would be accomplished primarily through debt-to-equity swaps. CCB will give Yunnan Tin 2.35 billion yuan next week in its first round of investment to swap some high-interest debt, Xinhua reported, without spelling out further details of the deal. The guidelines for debt-to-equity swaps, mooted as one solution to China’s growing corporate debt overhang, have been in development for months. However, some senior bankers and analysts have been outspoken critics of the idea, saying it risks saddling banks with ownership stakes in weak companies which Beijing sees as too big or too sensitive to fail [..]

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Actual rates are starting to creep up no matter what central banks do. Sign of the times.

US Mortgage Applications Down 6%, Rates Rise (CNBC)

As pumpkins pop up on front porches across the nation, the highest interest rates in a month are scaring consumers away from the mortgage market. Total mortgage application volume fell 6% on a seasonally adjusted basis for the week ended Oct. 7, compared to the previous week, according to the Mortgage Bankers Association. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) increased to 3.68%, from 3.62%, with points increasing to 0.35 from 0.32 (including the origination fee) for 80% loan-to-value ratio loans.

“As incoming economic data reassured investors regarding U.S. growth, and financial markets returned to viewing a December Fed hike as increasingly likely, mortgage rates rose to their highest level in a month last week,” said Michael Fratantoni, chief economist at the MBA. “Total and refinance application volume dropped to their lowest levels since June as a result.” Applications to refinance a home loan, which are highly rate-sensitive, have been falling for weeks, and took another 8% dive last week, seasonally adjusted. Mortgage applications to purchase a home fell a smaller 3% for the week and are 27% higher than one year ago. Comparisons to last year may be skewed, however, as new mortgage rules went into effect last October that pulled demand forward and then delayed mortgage processing.

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Charles asks: “Where will the money fleeing deflating bubbles go?”. But doesn’t add that much of it will simply evaporate. That’s what happens when bubbles pop.

Where Will All the Money Go When All Three Market Bubbles Pop? (CHSmith)

Everyone who’s not paid to be in denial knows stocks, bonds and real estate are in bubbles of one sort or another. Real estate is either an echo bubble or a bubble that exceeds the previous bubble, depending on how attractive the market is to hot-money investors.

Here’s a look at the inflation-adjusted S&P 500 (SPX) and margin debt: yep, a bubble.

With the Fed funds rate pinned to near-zero, bonds are in a bubble as well.

[..] Where will the money fleeing deflating bubbles go? Since the stock, bond and real estate markets are all correlated, it’s a question with no easy answer. What would $10 trillion seeking safe haven do to small asset classes such as precious metals, bitcoin, and tradable (liquid) sectors of the commodities markets? If the bubbles in bonds, stocks and real estate all pop, what markets will be left that can absorb trillions of hot money sloshing around? the short answer is: none. The chaos that will arise as trillions of dollars, yen, yuan and euros, etc. try to crowd through the fire exits as the asset bubbles pop will be monumental, and the the spikes in small asset class prices as the hot money floods in will be equally monumental.

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At least Ambrose doesn’t whine as much as many Brits do. “What [Hollande] is also admitting – à son insu – is that the union is held together only by fear. He might as well write its epitaph.” He’s writing his own epitaph, too.

If Europe Insists On A Hard Brexit, So Be It (AEP)

There may be serious economic trials ahead as we extract ourselves from the EU after more than forty years, but the slump in sterling is not one of them. The devaluation is necessary and desirable. The pound is now near ‘fair value’ based on the real effective exchange rate used by the IMF. All that has happened is a correction of the extreme over-valuation of sterling before Brexit, caused by capital inflows. This left the country with the worst current account deficit in peace-time since records began in the 18th Century. The fall is roughly comparable to the devaluation from 2007 to 2008 – though the same financial elites who talk so much of Armageddon today played it down on that occasion, mindful that their own banking crisis was the trigger. We can argue over how much the 2008 devaluation helped but it clearly acted as shock absorber at a crucial moment.

It was in any case a far less painful way to restore short-term competitiveness than the ‘internal devaluations’ and mass unemployment suffered by the eurozone’s Club Med bloc. But there is a deeper point today that is often overlooked. Central banks across the developed world are caught in a deflationary trap. The ‘Wicksellian’ or natural rate of interest has been falling ever lower with each economic cycle and is now at or below zero in half the global economy, a full seven years into the expansion. This paralyses monetary policy and has dark implications for the next downturn. It is why central banks are desperately trying to drive down their currencies to gain a little breathing room, or in the case of the US Federal Reserve to stop the dollar rising. By the accident of Brexit, Britain has pulled off a Wicksellian adjustment that eludes others.

With luck, the economy may even generate a few flickers of inflation, enough to let the Bank of England raise interest rates and start to restore ‘intertemporal’ equilibrium. Personally, I have been in favour of a “soft Brexit” that preserves unfettered access to the single market and passporting rights for the City, but not at any political cost – and certainly not if it means submitting to the European Court, which so cynically struck down our treaty opt-out on the Charter in a grab for sweeping jurisdiction. But what has caused me to harden my view – somewhat – is the open intimidation by a number of EU political leaders. “There must be a threat,” said French president Francois Hollande. “There must be a price… otherwise other countries or other parties will want to leave the European Union.”

These are remarkable comments in all kinds of ways, not least in that the leader of a democratic state is threatening a neighbouring democracy and military ally. What he is also admitting – à son insu – is that the union is held together only by fear. He might as well write its epitaph.

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Yet another example of why Britain should be delighted to leave the EU. But isn’t.

Brexit Means Whatever The EU Says It Means (Luyendijk)

If you still believe Britain will get a sweet deal out of Brexit because “the EU needs the UK more than vice versa”, ask yourself: why don’t we hear European politicians pleading with Britain “not to punish the EU over Brexit”? Why is the pound plunging against the euro and not the other way around? Why do we not hear of companies escaping from the EU to “free-trading Britain” while there is almost a traffic jam in the other direction? Why do EU leaders look rather relaxed when Brexit comes up, even cracking the odd joke or two about sending the British foreign minister, Boris Johnson, a copy of the Lisbon treaty so he can read up on reality? The negotiating cards with the EU are “incredibly stacked our way”, the Brexit minister, David Davis, told the House of Commons on Monday.

The cards certainly are “incredibly stacked” – but not in the way Davis imagines. To understand why, get a map of the EU and find Slovenia, a nation of 2 million people. No, that is Slovakia, with 5.4 million, almost three times bigger. Next look up Lithuania (population: 3.3 million), Latvia (2 million), Estonia (1.3 million) and Luxembourg (500,000). Now repeat after me: all these EU members, as well as the other 21, hold veto power over whatever deal the UK (65 million) manages to negotiate with the EU (population: 508 million). That is right, 1.2 million Cypriots can paralyse the British economy by blocking a deal, and the same holds true for Malta (400,000). Did I mention the Walloon parliament in Namur (get that atlas out again) has veto power too? And then there is, of course, the European parliament in Strasbourg.

Brexiteers argue that the EU takes ages to conclude trade deals so Britain is better off striking them on its own. The former is certainly true. Consider the Walloons currently threatening to derail an EU trade deal with Canada. But how does EU institutional sluggishness square with the Brexiteers’ promise that the EU is even capable of concluding a swift Brexit deal with the UK, even if it wanted to do? It doesn’t. And this is true even before we look at whether the EU would have an interest in making things easy for Britain. Remember how, before the EU referendum, David Cameron went to Brussels threatening to support leave unless he was given a range of “concessions”? Well, two can play that game, now that the tables have turned – except the EU has 27 nations. That is a lot of scope for blackmail à l’anglaise.

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A new torture technique. It’s a Good Cop Bad Cop set-up, but with three parties: EU, ECB and IMF, who keep on blaming both each other and the suspect, who may be innocent but is never released.

ECB Says Greece Needs Clarity on Debt to Regain Market Access (BBG)

Greece won’t regain stable access to international bond markets unless creditors ease repayment terms on the country’s bailout loans, ECB Executive Board member Benoit Coeure said. The country cannot gain “solid and long-lasting market access without the clarity about the sustainability of Greek debt,” Coeure told European Parliament lawmakers on Wednesday, adding that the IMF should stay fully involved in the Greek bailout to ensure fair treatment in Greek debt talks. “There are serious concerns about the sustainability of Greek public debt,” the Frenchman said during the hearing. “We are looking forward to a solution that can reassure markets, restore confidence in the dynamics of public debt, allow the full involvement of the IMF in the program – which would enhance the program’s credibility – and restore market access for Greece ahead of the end of the program in July 2018.”

The IMF is at loggerheads with Greece’s European creditors as the Washington-based lender insists on concrete and quantified relief measures before extending any more loans to the continent’s most-indebted state. While the institution acknowledges that a nominal haircut on Greek bailout loans is implausible, it has demanded more concessionary repayment terms, including extensions of maturities and a cap on interest rates. Wolfgang Schaeuble has said the source of Greece’s woes is a lack of competitiveness, not elevated debt levels, and reiterated calls earlier this week for the IMF to contribute to Greek bailout loans. The ECB “very much” believes that the IMF should be on board when devising a solution for Greek debt, Coeure said. The ECB has excluded Greek government bonds from its asset-purchase program, pending “an additional level of safeguards and clarity on debt sustainability.”

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Bit hard to find the best part. There’s a RealVision interview connected to it.

Steve Keen: A Renegade Economist Has A Plan For Reducing Global Debt (RV)

What he is really focused on is here is reducing the debt burden and is inspired by US philanthropist Richard Vague, who started two US credit card companies, First USA and Juniper Financial — and now campaigns against excessive debt. “We have to cope with the residue, and it’s created this enormous pile of elephant dung of debt. We have to get rid of it. I’m simply being practical about how do we get rid of it,” Keen said. “He’s a totally realistic man (Vague), totally feet-on-the-ground personality. And he said, when you look at history, there has never been a successful episode of de-leveraging by growing out of it. It’s been debt write offs every last time. Somehow debts have been written off whether it’s being done at the individual scale by individual bankruptcies or some sort of collective action.

“We can’t get rid of it by market mechanisms, and we can’t grow our way out of it. “So we’ve got this pile of elephant dung we need to get rid of. Let’s work out a way of doing it. Richard’s way is to let the banks write debt off over like a 30-year amortization period. So you have somebody who has got a $1million dollar mortgage, you write it down to half a million, in one year, that half a million loss by the bank would wipe the bank out. You let them out of that over 30 years. That why they can cope with it, and you get a recovery that way. “Mine is to say let’s use the state’s capacity to create money to do the cancellation. But whatever way you go about it, you’ve got to reduce that pile of elephant dung we call accumulated private debt.”

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Tidings of things to come.

Pension Benefits In Tiny California Town Slashed As ‘Ponzi Scheme’ Exposed (ZH)

For the tiny little town of Loyalton, California, with a population of only 700, a failure of city council members to understand the difference between the calculation of a regular everyday pension liability and a “termination liability” has left 4 residents at risk of losing their pensions from Calpers. According to the New York Times, the town of Loyalton decided to drop out of Calpers back in 2012 in order to save some money but what they got instead was a $1.6mm bill which was more than their annual budget. For those who aren’t familiar with pension accounting, we can shed some light on the issue faced by Loyalton. There are two different ways to calculate the present value of pension liabilities. One methodology applies to “solvent”, fully-functioning pension funds (we call this the “Ponzi Methodology”) and the other applies to pensions that are being terminated (we call this one “Reality”).

Under the “Ponzi Methodology,” pension funds, like Calpers, discount their future liabilities at 7.5% in order to keep the present value of their liabilities artificially low. That way, pension funds can maintain the illusion that they’re solvent and the Ponzi scheme can continue on so long as there are enough assets to cover annual benefit payments. Now, the managers of the pension funds aren’t actually dumb enough to believe that the “Ponzi Methodology” accurately reflects the true present value of future liabilities because they know that, particularly in light of current Central Banking policies around the world, their actual long-term returns will be much lower than 7.5%. Therefore, they have a completely separate, special calculation that applies when towns, like Loyalton, want to exit their plan.

This “termination liability”, or what we refer to as “Reality”, uses a discount rate closer to or even below risk-free rates which means the present value of the future liabilities is much higher. As a quick example, lets just assume that Loyalton’s 4 pensioners draw $225,000 per year, in aggregate pension benefits, and enjoy a 2% annual inflation adjustment. Assuming a 7.5% discount rate, the present value of that liability stream is about $2.9mm. However, if the discount rate drops to 2%, the present value of those liabilities surges to $4.5mm…hence the $1.6mm bill sent to the Loyalton City Council.

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And so it begins (again).

Dumped Apartment Projects ‘Groundhog Day’ To Global Financial Crisis (NZ Herald)

The collapse of property developments in Auckland as banks refuse to fund projects due to blowouts in construction and labour costs, is “almost groundhog day” to the run-up of the global financial crisis in 2007/2008 says John Kensington, the author of KPMG’s Financial Institutions Performance Survey. The most recent development to be cancelled is the Flo apartment project in Avondale. Buyers’ 10% deposits were refunded this week as the developer cited funding and construction cost issues. Speaking to BusinessDesk, Kensington said exactly the same thing was happening at the start of the GFC. “Banks were looking at property development opportunities back then, and going, ‘we’ve got a record rise in prices, we’ve got shortages of materials, we’ve got shortages of labour, we don’t think this property development has been correctly analysed, we don’t think it’s going to work’, so they declined to fund it.”

Kensington said this year was different because the finance companies were diminished and no longer in a position to take up the slack. “The money went to finance companies [before the GFC] who, having got the money, had to find a home and probably invested in the very things the banks had said no to. At least this time round there is not as strong a property finance company sector there to take up the slack when the banks said no. I’m sure if there was, they would happily bank some of this.” He added that there was a “real strain on the construction industry, labour costs are blowing out, and there are some shortages of building materials”. Prime Minister John Key yesterday told the Herald he stood by comments that young people should be looking to buy apartments as their first home.

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So go after him, I dare you.

Wells Fargo CEO John Stumpf Steps Down, Walks Away With $120 Million (WSJ)

Wells Fargo Chairman and CEO John Stumpf, under fire for the bank’s sales-tactics scandal and his own handling of its fallout, is stepping down from both roles, effective immediately, the bank said Wednesday. Mr. Stumpf will be replaced as head of the third-largest U.S. bank by assets by President and COO Timothy J. Sloan, who was widely seen as his heir apparent. Mr. Stumpf won’t receive a severance package, the bank said. The board, at Mr. Stumpf’s own recommendation, had previously decided he should relinquish $41 million in unvested equity, one of the biggest-ever forfeitures of pay by a bank chief. He still retires with tens of millions of dollars earned during roughly 35 years at the bank. Mr. Stumpf’s departure comes after he was subjected to two grillings on Capitol Hill in which he was attacked by both Democrats and Republicans.

The bank also faces numerous federal and state inquiries into its sales-practices issues, including from the Justice Department. The toppling of Mr. Stumpf, 63 years old and just shy of his 10th year as CEO, marks a stunning comedown for a firm that largely passed through the financial crisis unscathed and which was seen as a reliable Main Street lender. That reputation was shattered by the sales-tactics scandal, which revealed that bank employees had opened as many as two million accounts without customers’ knowledge. The bank has said it regrets the improper behavior, has ended sales goals for retail-bank employees and has been refunding customers improperly charged.

The problems came to light Sept. 8 when Wells Fargo agreed to a $185 milion fine and enforcement action with regulators. That settlement also brought to light that the bank had fired 5,300 employees over a five-year period for improper behavior. This underscored the breadth of problems related to a hard-charging sales culture that pushed bankers to sell multiple products to individual customers.

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Curious report.

Moscow Officials Told To Immediately Bring Back Children Studying Abroad (ZH)

In Europe, when it gets serious, you have to lie… at least if you are an unelected bureaucrat like Jean-Claude Juncker. In Russia, however, when it gets serious, attention immediately turns to the children. Which is why we read a report in Russian website Znak published Tuesday, according to which Russian state officials and government workers were told to bring back their children studying abroad immediately, even if means cutting their education short and not waiting until the end of the school year, and re-enroll them in Russian schools, with some concern. The article adds that if the parents of these same officials also live abroad “for some reason”, and have not lost their Russian citizenship, should also be returned to the motherland. Znak cited five administration officials as the source of the report.

The “recommendation” applies to all: from the administration staff, to regional administratiors, to lawmakers of all levels. Employees of public corporations are also subject to the ordinance. One of the sources said that anyone who fails to act, will find such non-compliance to be a “complicating factor in the furtherance of their public sector career.” He added that he was aware of several such cases in recent months. It appears that the underlying reason behind the command is that the Russian government is concerned about the optics of having children of the Russian political elite being educated abroad, while their parents appear on television talking about patriotism and being “surrounded by enemies.”

While we doubt the impacted children will be happy by this development, some of the more patriotic locals, if unimpacted, are delighted. Such as Vitaly Ivanov, a political scientist who believes that the measure to return children of officials from studying abroad, is “long overdue.” According Ivanoc, the education of children of the Russian elite abroad is subject to constant ridicule and derision against the ruling regime. “People note the hypocrisy of having a centralized state and cultivating patriotism and anti-Western sentiment, while children of government workers study abroad. You can not serve two gods, one must choose.”

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“..if they vote for Hillary it’s war. It will be a short movie. There will be Hiroshimas and Nagasakis everywhere.”

Putin Ally Tells Americans: Vote Trump Or Face Nuclear War (R.)

Americans should vote for Donald Trump as president next month or risk being dragged into a nuclear war, according to a Russian ultra-nationalist ally of President Vladimir Putin who likes to compare himself to the U.S. Republican candidate. Vladimir Zhirinovsky, a flamboyant veteran lawmaker known for his fiery rhetoric, told Reuters in an interview that Trump was the only person able to de-escalate dangerous tensions between Moscow and Washington. By contrast, Trump’s Democratic rival Hillary Clinton could spark World War Three, said Zhirinovsky, who received a top state award from Putin after his pro-Kremlin Liberal Democratic Party of Russia (LDPR) came third in Russia’s parliamentary election last month.

Many Russians regard Zhirinovsky as a clownish figure who makes outspoken statements to grab attention but he is also widely viewed as a faithful servant of Kremlin policy, sometimes used to float radical opinions to test public reaction. “Relations between Russia and the United States can’t get any worse. The only way they can get worse is if a war starts,” said Zhirinovsky, speaking in his huge office on the 10th floor of Russia’s State Duma, or lower house of parliament. “Americans voting for a president on Nov. 8 must realize that they are voting for peace on Planet Earth if they vote for Trump. But if they vote for Hillary it’s war. It will be a short movie. There will be Hiroshimas and Nagasakis everywhere.”

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Nice country to live in.

“We Are At War And You Are The Front-line Troops In This War” (I’Cept)

“That’s the next wave in the militarization of police,” Atkinson told The Intercept in an interview. “What we found was a whole slew of retired military officers now in the private sector now selling the exact same surveillance technology that they just got back from Iraq and Afghanistan with to local law enforcement for small money on the dollar.” The intent of “Do Not Resist,” Atkinson said, is to provide a glimpse inside the realities of American policing, challenge the policing-for-profit model that has caused departments in economically depressed communities to treat their citizens as walking ATM machines, call out a warrior culture that divides law enforcement from the public they’re sworn to serve, and flag the dangers of war-zone technologies being applied domestically.

[..] All told, the team traveled to 19 states, went on roughly 20 police ride-a-longs, observed half a dozen raids, and interacted with hundreds of police officers. The hope was to be on-hand for an incident in which a SWAT team’s use of heavy weapons would be unquestionably warranted. “I thought the whole time I would be able to show something that would kind of reflect the entire scope of what a SWAT officer might go through sometimes, where you actually do need the equipment,” Atkinson explained.

Instead, the filmmaker repeatedly found himself watching police with military-grade weaponry executing dubious search warrants. The frequency of the raids was particularly shocking, with one of the officers in the film claiming his team does 200 such operations a year. By comparison, Atkinson notes, his father performed a total of 29 search warrant raids over his entire 13 years in SWAT – according to some estimates, SWAT teams now carry out between 50,000 to 80,000 raids across the country annually. “The search warrants, we’re told, are always used for massive drug dealers and kingpins, and then we run in these homes and we never found anything,” Atkinson said.

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The real problem is that such a thing as a ‘seed and chemical industry’ exists at all. That agriculture has been just about fully taken over by 100+ year-old chemical companies that started out supplying death and now seek to control life, control our food to sell their chemicals, which our food doesn’t need.

The Global Seed And Chemical Industry Is Undergoing A Rapid Realignment (BBG)

The global seed and chemical industry is undergoing a rapid realignment, with three massive deals in less than a year. Last month, Bayer clinched a bid to buy Monsanto, the world’s biggest seed company, for $66 billion, ending a months-long chase. DuPont and Dow Chemical plan a $59 billion merger of equals, while China National Chemical waits to complete its $43 billion takeover of Swiss seed maker Syngenta. While the dominant players get bigger, some independents look for advantages in research and development. About two-thirds of Stine’s employees work in R&D using traditional breeding techniques to improve corn and soybean genetics. The company sells these improved seeds to farmers and also licenses them to bigger companies like Monsanto that, as part of the bargain, give Stine Seed priority access to the newest genetically modified traits that help farmers control weeds and bugs.

Closely-held companies account for about 20% of U.S. sales in corn seed and 22% in soybeans, according to Todd L. Martin, executive director of the Independent Professional Seed Association, which has 118 regular members. The bulk of Stine Seed profit comes from licensing its genetics research to bigger rivals. But customer backlash from the big mergers means the company’s revenue from its retail sales could “easily double,” Stine said. The company declined to provide sales figures. Smaller companies also may find an edge over pricier biotech products, said Jason Miner, an analyst at Bloomberg Intelligence. The market for seeds with multiple traits to control different types of insects and to withstand multiple weed killers may have reached a saturation point, he said. “Traditional breeding may actually be on the rise,” Miner said. “Farmers are less interested in speculating on high-cost, potential yield boosters. They want cost-effective solutions.”

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Get farmers to stop buying the stuff.

Monsanto Dismisses ‘People’s Tribunal’, ‘Moral Trial’ As A Staged Stunt (G.)

International judges will take evidence from 30 witnesses and “victims” of US agri-business Monsanto in an attempt by hundreds of grassroots groups to hold the company accountable for what they allege are human rights violations, crimes against humanity, and “ecocide”, or widespread environmental damage. High-profile witnesses, including former UN special rapporteur on the right to food Olivier De Schutter, will give evidence alongside Argentine doctors, Mexican beekeepers and toxicologists and scientists from 15 countries. The five judges will deliver what is expected to be a lengthy advisory legal opinion. The three-day peoples’ tribunal, which will be held in The Hague this weekend, will adopt the format of the UN’s international court of justice but will have no standing in law.

Organisers have described the hearing as a “moral trial” and “a test of international law”. “It aims to assess the allegations of harm made against Monsanto as well as the human health and environmental damages caused by the company throughout its history,” said a spokeswoman in London. The agro-chemical company, which is the subject of a £51bn takeover by German conglomerate Bayer, has declined to take part, or to defend its history at the tribunal. The company, which manufactured hundreds of thousands of tonnes of Agent Orange for use as a chemical weapon in the Vietnam war, is the world’s biggest genetically modified seed corporation. Monsanto developed toxic polychlorinated biphenyls and also makes glyphosate, the primary ingredient in Roundup, a widely used but controversial herbicide.

The firm’s accusers in The Hague will hold it and other major chemical companies primarily responsible for developing an unsustainable system of farming. “Monsanto promotes an agro-industrial model that contributes at least one-third of global anthropogenic greenhouse gas emissions; it is also largely responsible for the depletion of soil and water resources, species extinction and declining biodiversity, and the displacement of millions of small farmers worldwide. This is a model that threatens peoples’ food sovereignty by patenting seeds and privatising life”, said the spokeswoman.

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Everyone’s happy to saddle Italy with the problem, same as Greece. It’s what the EU stands for.

Cut Funds To EU States That Turn Away Refugees, Italy Urges (R.)

Eastern states that continue to refuse to take in refugees to help frontline countries in Europe’s migration crisis should have their EU funding cut, Italian Prime Minister Matteo Renzi said on Wednesday. Italy is the main destination for the waves of migrants fleeing violence and poverty in Africa. It is housing 160,000 asylum seekers out of more than 460,000 refugees who have reached its shores from North Africa since the start of 2014. Of 39,600 refugees due to be relocated from Italy under an EU quota plan, so far only 1,300 have been moved, according to the European Commission. While outlining his priorities for the EU’s next summit meeting on Oct. 20-21 in Brussels, Renzi told parliament: “It’s necessary that Italy be the promoter of a very tough position toward those countries that have received a lot of money for belonging to the bloc to relaunch their territories, and who are shirking their commitments to relocate immigrants.”

Poland, Hungary and other formerly communist states are firmly opposed to relocation quotas for refugees and say immigration, especially from the Muslim cultures of the Middle East, would disrupt their homogeneous societies. They also object to paying penalties for not taking people in. The financial transfers to less-developed areas of the EU from which they benefit, and which Renzi was referring to in his comments, absorb a large portion of the current €1 trillion EU long-term budget. The proposal for the next EU budget, for the 2021-27 period, is supposed to be completed by the end of next year. “The positive aspects of belonging to the EU must be balanced by the duties that come with membership,” Renzi said.

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Oct 082016
 
 October 8, 2016  Posted by at 9:34 am Finance Tagged with: , , , , , , , , , ,  4 Responses »
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DPC Royal Street, New Orleans 1900


US Consumer Borrowing Rises by Most in Nearly a Year (BBG)
US Consumer Credit Has Second Biggest Jump On Record (ZH)
US Payrolls Up 156K, Missing Expectations, Unemployment Rate Rises To 5.0% (ZH)
EU Leaders Line Up To Insist UK Will Pay A High Price For Brexit Stance (G.)
Worries Deepen That Globalization Is Hitting the Skids (WSJ)
Worries Grow That China Faces a Perilous Property Bubble (WSJ)
EU Imposes Import Duties Of Up To 73.7% On Cheap Chinese Steel (G.)
He’ll Likely Lose – But Trump Is The Final Warning To Elites (G&M)
Why Does This Happen on My Vacation? -The Trump Tapes (Scott Adams)
Hounds Hot On The Heels Of Poachers In Rhino Country (G.)
New Zealand Child Poverty A Source Of Deep Concern: UN (G.)
UN Watchdog Demands Saudis Stop Child Executions (AFP)

 

 

No deleveraging: Household debt rises 8.5% annualized.

US Consumer Borrowing Rises by Most in Nearly a Year (BBG)

Household borrowing increased in August at the fastest pace in almost a year, led by a jump in loans for school and automobile purchases. The $25.9 billion increase, or an annualized 8.5%, followed a revised $17.8 billion gain the prior month, Federal Reserve figures showed Friday. The median projection called for a $16.5 billion advance. Non-revolving credit, which includes car and educational loans, also posted the largest advance since September of last year. Steady hiring and income growth may be making Americans more willing to borrow, helping to sustain consumer spending and the economic expansion.

Non-revolving credit increased $20.2 billion, while revolving debt rose $5.6 billion during the month, the Fed’s report showed. Lending by the federal government, mostly for student loans, climbed $18.7 billion in August on an unadjusted basis as students prepared to return to school for the fall semester. The Fed’s consumer credit report doesn’t track debt secured by real estate, such as home equity lines of credit and home mortgages.

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Tyler on the household debt topic, delving a bit deeper, as in beyond seasonal adjustments.

US Consumer Credit Has Second Biggest Jump On Record (ZH)

It will likely not come as a big surprise that at a time when US personal savings are once again declining, perhaps as a result of soaring health insurance costs, that US consumers are forced to borrow increasingly more to make ends meet. And, as expected, the latest consumer credit report confirmed this, when moments ago the Federal Reserve announced that in August, total US credit surged by $25.9 billion on a seasonally adjusted basis, smashing expectations of a $16.5 billion increase, and the third biggest monthly jump since 2001.[..] what was perhaps most interesting is that on a non-seasonally adjusted basis, when removing the artificial Arima-X-13 seasonal factors, August consumer credit soared by a near record $46.8 billion, an absolute outlier month, and surpassed just once in history.

So for all those who, still, erroneous claim that US consumers are deleveraging, show them this chart, because the scramble if not so much into revolving debt then certainly into government-funded auto and student loans, is unlike anything ever seen. And speaking of just those two kinds of debt, here they are broken out: they have both never been higher.

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Last big jobs report before the elections (November’s will come too late to make much difference) is mixed, but certainly not very good.

US Payrolls Up 156K, Missing Expectations, Unemployment Rate Rises To 5.0% (ZH)

With Wall Street all bulled up on the economy, expecting a print of 175K while the whipser number was decidedly higher, and closer to 200K thanks to Goldman’s optimism, moments ago the BLS reported that in September the US created only 156K jobs, missing expectations, and down from the upward revised 167K in August, leaving the question of whether the Fed will hike imminently, unanswered. However, offsetting the September miss, last month’s disappointing print of 151K was revised to 167K. At the same time, the change in total nonfarm payroll employment for July was revised down from +275,000 to +252,000. With these revisions, employment gains in July and August combined were 7,000 less than previously reported.

Over the past 3 months, job gains have averaged 192,000 per month. The household survey employment number of 151.968MM was 354K bigger than last month, and pushed the annual increase higher by 2.0%, the biggest since March 2016. The unemployment rate, at 5.0%, and the number of unemployed persons, at 7.9 million, changed little in September, up 0.1% from August and the highest in 6 months. Both measures have shown little movement, on net, since August of last year. The participation rate rose by 0.1% t 62.9% as people not in the labor force declined by 207K.

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Which should make Britons very happy to leave that bunch of mobsters behind. Even if their own new ‘leaders’ are just as bad. But those you can vote out next time around.

EU Leaders Line Up To Insist UK Will Pay A High Price For Brexit Stance (G.)

Britain and the EU appear more bitterly divided over Brexit than at any time since the referendum, with European leaders ramping up their rhetoric after Theresa May signalled she would seek a clean break with the bloc. The prime minister’s Conservative conference speech, in which she indicated Britain would prioritise immigration control and restore the primacy of UK law to become an “independent, sovereign nation” without full access to the single market, drew a sharp response from continental capitals. In Paris, François Hollande said Britain must suffer the consequences of its decision. “The UK has decided to do a Brexit. I believe even a hard Brexit,” he said. “Well, then we must go all the way through the UK’s willingness to leave the EU. We have to have this firmness.”

If not, “we would jeopardise the fundamental principles of the EU”, the French president said on Thursday night. “Other countries would want to leave the EU to get the supposed advantages without the obligations.. There must be a threat, there must be a risk, there must be a price.” Hollande’s message was underlined on Friday by the president of the European commission, Jean-Claude Juncker, who said the 27 remaining member states must not give an inch in exit negotiations. “You can’t have one foot in and one foot out,” he said. “We must be unyielding on this point.” Britain risked “trampling everything that has been built” over six decades of European integration, he said.

In Berlin, Angela Merkel rammed home the same point. “If we don’t insist that full access to the single market is tied to complete acceptance of the four basic freedoms, then a process will spread across Europe whereby everyone does and is allowed what they want.”

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Turns out, globalization is just another religion. Hilarious that the CEO of United Parcel Service is quoted; yes, we understand they are all for ‘free’ trade, it’s what their business is based on.

Worries Deepen That Globalization Is Hitting the Skids (WSJ)

Global finance ministers and central bankers are descending on Washington this week with a central concern in mind: fear that the modern age of globalization is hitting a wall. Last year’s $646 billion in foreign direct investment in rich economies represents a 40% drop from the peak before the financial crisis. International lending, as measured by cross-border banking claims at the Bank for International Settlements, is down nearly $2.6 trillion, or 9%, over the past two years. International trade this year will grow at the slowest pace since 2007, according to the World Trade Organization, which has slashed its forecast for growth in global trade volumes to 1.7% in 2016 from a previous estimate in April of 2.8%.

Imports among the world’s 20 largest economies have fallen as a share of their GDP for four consecutive years, and growth in demand for shipping containers fell to 4% this year after four decades of double-digit expansion. As financial officials gather in the U.S. capital this week at semiannual meetings of the IMF and the World Bank, there is widespread concern that this global malaise could worsen if nations intentionally turn inward. Too many politicians are backing trade barriers in a misguided effort to boost national growth in the short term, said Roberto Azevedo, director general of the WTO. “The medicine that is being often prescribed is protectionism, and that is exactly the kind of medicine that is going to hurt the patient, not help him,” he said.

The head of the IMF, Christine Lagarde, also expressed concern over rising protectionism around the world, including in the U.S. “Curbing free trade would be stalling an engine that has brought unprecedented welfare gains around the world over many decades,” she said. The slower-than-expected economic activity is feeding a cycle of banks pulling back from international risk, companies hesitant to invest in new production, and governments issuing regulations—often linked to national security—favoring domestic producers. “Now that we’re in this 2% [growth] range in the U.S. and less than that in other countries, people are clinging more to the past and thinking more how to protect versus embracing the future,” said David Abney, CEO of United Parcel Service.

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“The reality speaks of morbid financial excess..” (BTW, two WSJ articles in a row that start with Worries, some that deepen, others grow -same thing)

Worries Grow That China Faces a Perilous Property Bubble (WSJ)

The latest buying frenzy began late last year, when Mr. Xi set a national goal of reducing the number of unsold homes in 2016. In the following months, cities rushed to relax home-purchase curbs that were put in place to discourage speculation during the last housing boom. Beijing also made it easier for homebuyers to access credit. The Chinese leadership’s hope was that modest borrowing by families and individuals would boost property sales and cut inventory, aiding related industries such as construction that, all told, account for about a fifth of China’s gross domestic product. It hasn’t gone as planned. Too much investment went into housing, economists say, aided by a series of central-bank easing measures since late 2014.

Government data show more than a third of new loans in the first half of 2016 went to housing. By comparison, an average 17.4% of new loans went to housing between 2010 and 2015, according to BNP Paribas. “The reality speaks of morbid financial excess,” said Harrison Hu at RBS. In July, six major cities showed home-price gains of more than 20% from the prior year; in August, 10 cities did. In the coastal city of Xiamen, prices skyrocketed 44.3%. Average new home prices across 70 Chinese cities in August rose far less, 7.5%, suggesting that many smaller cities are still struggling with too much inventory.

Chinese households’ leverage, meanwhile, is fast rising to dangerous levels. A study by China’s Haitong Securities shows that total home loans are expected to make up 30% China’s GDP this year, up from less than 20% three years ago. That is higher than Japan’s level during its property-bubble years in the late 1980s. One moderating factor: Most Chinese households pay down payments equal to about a third of the home’s value, making homeowners less vulnerable to price drops.

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Yeah, about that globalization thing… You know, protectionism and all that…

EU Imposes Import Duties Of Up To 73.7% On Cheap Chinese Steel (G.)

The European Union has slapped tariffs of up to 73.7% on Chinese steel after manufacturers were forced to cut jobs due falling prices and demand for the material amid an influx of cheap imports from Asia. Thousand of job have already been lost in the steel industry in Britain in the last year with thousands more at risk as the sector remains under pressure. Industry leaders have partly blamed the squeeze on the sector on China’s dumping of cheap steel in Europe as it struggles to find buyers for its products domestically. The EU has agreed to impose import duties of between 13.2% and 22.6% on Chinese hot-rolled steel, which is used in pipelines and gas containers, and 65.1% and 73.7% on heavy plates, which are used in civil engineering projects.

The state of the steel industry became part of the debate about Britain’s future in the EU before the referendum in June, with Brexiters claiming that the country would be better able to protect workers and introduce tariffs on Chinese imports if it voted to leave. UK Steel, the industry trade body, welcomed the speed at which the new EU tariffs had been introduced but warned that the levy on hot-rolled steel was not high enough, which could hurt Port Talbot, the biggest steelworks in Britain. Dominic King, head of policy and external affairs at UK Steel, said: “The speed at which tariffs have been imposed on dumped steel from China by the EU is very welcome. However, while we hope the tariffs for heavy plate are robust enough to ensure free and fair trade, the proposed levels for hot-rolled steel are not high enough, which might encourage China to continue dumping it on to the EU market.”

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I don’t think Trump will lose. But good perspective, from Canada.

He’ll Likely Lose – But Trump Is The Final Warning To Elites (G&M)

Donald Trump will probably lose the election. But he is a final warning. Unless political elites of both the left and the right become more humble, unless they once again ask themselves how their agendas will play in Peoria, the next rough beast might slouch over the corpse of the republic. “Will it play in Peoria?” goes back to the days of vaudeville. The city of 115,000 in central Illinois was once considered the ultimate focus group, the embodiment of Middle America, the place to test a joke or a soda or a social policy to learn what white folks without a fancy degree thought of it. Back in the day, you knew better than to defy the settled judgment of this ultimate test market. You went as far as Peoria would let you, and no further.

But we grew impatient. You have to fight Jim Crow, whatever Peoria thinks. Free trade will lift most boats, even if it swamps a few. The environment is too precious, and at too much risk, to go slow. Lower taxes and less red tape will help the economy grow, even if it profits some more than others. The left wanted social justice, protection for minorities, a cleaner environment. The right wanted lower taxes and trade deals. Despite the rhetoric, each accommodated the other. Republicans left the Democrats’ progressive policies largely intact; Democrats learned to embrace, or at least reluctantly accept, globalization. And everybody knew what was really going on in Washington. A tax break for you. A subsidy for me. You take care of my client and I’ll take care of yours. Deal? Then let’s celebrate. We’ll expense it.

What did the guy on the line think about this? The wife at Wal-mart? The folks at the ball park? No one really cared. Yeah, politicians chased their vote. But respect them, even defer to their collective wisdom? Not so much. The accommodation between left and right started unravelling in the 1980s. The Bork confirmation. The Thomas confirmation. Contract with America. Impeaching Bill Clinton. Iraq. Obama. The Tea Party. Gay marriage. And now the Democrats want to replace a black president with a woman? A CLINTON? Meanwhile, Peoria is hurting. The city is home to Caterpillar. But the heavy-equipment giant has outsourced most of its work force overseas or to so-called right-to-work states.

But what does Washington care? The left worries more about combatting global warming than about blue-collar workers with bad backs and no jobs. The right promises to retrain them, but somehow never gets around to it. The laid-off boys in the bars of Peoria blame the illegals, the only ones even more voiceless than themselves. They seethe at the Wall Street suits who destroyed the economy and got off scot-free. And what the hell is transgender, anyway? They look at their daughter’s report card. She’s only getting Cs. What future is there for anyone who’s only getting Cs?

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How wrong is Dlibert’s alter ego? “It is fair to assume that Bill and Hillary are about to experience the worst weeks of their lives.”

Why Does This Happen on My Vacation? -The Trump Tapes (Scott Adams)

By now you know about the Access Hollywood recording in which Donald Trump said bad things eleven years ago. Many of my readers asked me to weigh in. I’ll give you my thoughts, in no particular order.

1. If this were anyone else, the election would be over. But keep in mind that Trump doesn’t need to outrun the bear. He only needs to outrun his camping buddy. There is still plenty of time for him to dismantle Clinton. If you think things are interesting now, just wait. There is lots more entertainment coming.

2. This was not a Trump leak. No one would invite this sort of problem into a marriage.

3. I assume that publication of this recording was okayed by the Clinton campaign. And if not, the public will assume so anyway. That opens the door for Trump to attack in a proportionate way. No more mister-nice-guy. Gloves are off. Nothing is out of bounds. It is fair to assume that Bill and Hillary are about to experience the worst weeks of their lives.

4. If nothing new happens between now and election day, Clinton wins. The odds of nothing new happening in that timeframe is exactly zero.

5. I assume that 75% of male heads of state, including our own past presidents, are total dogs in their private lives. Like it or not, Trump is normal in that world.

6. As fictional mob boss Tony Soprano once said in an argument with his wife, “You knew what you were getting when you married me!” Likewise, Trump’s third wife, Melania, knew what she was getting. It would be naive to assume Trump violated their understanding.

7. Another rich, famous, tall, handsome married guy once told me that he can literally make-out and get handsy with any woman he wants, whether she is married or not, and she will be happy about it. I doubted his ridiculous claims until I witnessed it three separate times. So don’t assume the women were unwilling. (Has anyone come forward to complain about Trump?)

8. If the LGBTQ community wants to be a bit more inclusive, I don’t see why “polyamorous alpha male serial kisser” can’t be on the list. If you want to label Trump’s sexual behavior “abnormal” you’re on shaky ground.

9. Most men don’t talk like Trump. Most women don’t either. But based on my experience, I’m guessing a solid 20% of both genders say and do shockingly offensive things in private. Keep in mind that Billy Bush wasn’t shocked by it.

10. Most male Hollywood actors support Clinton. Those acting skills will come in handy because starting today they have to play the roles of people who do not talk and act exactly like Trump in private.

11. I’m adding context to the discussion, not condoning it. Trump is on his own to explain his behavior.

12. Clinton supporters hated Trump before this latest outrage. Trump supporters already assumed he was like this. Independents probably assumed it too. Before you make assumptions about how this changes the election, see if anyone you know changes their vote because of it. All I have seen so far is people laughing about it.

12. I hereby change my endorsement from Trump to Gary Johnson, just to get out of the blast zone. Others will be “parking” their vote with Johnson the same way. The “shy Trump supporter” demographic just tripled.

13. My prediction of a 98% chance of Trump winning stays the same. Clinton just took the fight to Trump’s home field. None of this was a case of clever strategy or persuasion on Trump’s part. But if the new battleground is spousal fidelity, you have to like Trump’s chances.

14. Trump wasn’t running for Pope. He never claimed moral authority. His proposition has been that he’s an asshole (essentially), but we need an asshole to fight ISIS, ignore lobbyists, and beat up Congress. Does it change anything to have confirmation that he is exactly what you thought he was?

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Stop bombing teh Middle East and send your troops to protect Afrian wildlife. Much better use of force. May actually save mankind instead of destroying it.

Hounds Hot On The Heels Of Poachers In Rhino Country (G.)

“I am ready to die for conserving the rhino,” says Wisdom Makhubele. But the brave young ranger now has another weapon in the war against rhino poaching: the extraordinary nose of tracking hounds. The trained dogs can run poachers to ground far faster than people, sometimes even being set free in packs and followed from helicopters. The new canine training unit at the Southern African Wildlife College (SAWC), near Acornhoek, opened earlier this year and dogs have already brought armed poachers to heel in Kruger national park, the epicentre of the rhino poaching crisis. At least 6,000 African rhinos have been slaughtered by poachers since 2008, to fuel the soaring demand for its horn in Asia, where it is highly valued as a supposed tonic and status symbol.

The rhino poaching epidemic across Africa has exploded in recent years, with annual increases in killings every year since 2009: 1,338 were slaughtered in 2015. It was a hot topic at the major wildlife trade summit in Johannesburg this week, where an attempt by Swaziland to legalise rhino horn trade was defeated. South Africa hosts more than 90% of the 20,000 surviving white rhinos and almost half the 4,800 remaining black rhinos and saw a slight dip in the slaughter in 2015, the first decrease in nine years. Over 70% of the rhino kills occur in Kruger and a sign on the way into the park reads “Poachers will be poached”. Dogs have been used for camp security for years, but the escalating poaching crisis has found them a new role.

“They are awesome – they are instinctive to tracking,” says Johan van Straaten, manager of the dog unit, which has been funded by WWF Nedbank Green Trust. “All these dogs can track, it’s in their genes. But we train them to track the scent we want. These dogs are imprinted on human scent, like narcotics dogs are on drugs.” [..] Being a ranger in the war on poaching can be deadly – more than 1,000 rangers were killed around the world in the last decade and many more injured. The danger follows the rangers home too. “They are targets and their families can be targets, that’s for certain,” says van Straaten. Makhubele comes from a local village. “People there know me and some of them are poachers, but I am not afraid,” he says. “This [rhino population] is our legacy and we have to look after it.”

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New Zealanders must stand up against their government. It’s very much your shame too.

New Zealand Child Poverty A Source Of Deep Concern: UN (G.)

The UN has said in a damning report that it is deeply concerned about New Zealand’s persistently high rates of child poverty. Unicef says 300,000 children – a third of New Zealand’s child population – now live below the poverty line. This is a rise of 45,000 in a year. Government representatives travelled to Geneva last month to present the country’s progress on its commitment to protecting the rights of the child to the UN. The UN committee’s report acknowledges widespread public debate and media attention on child poverty in New Zealand, but expresses serious concern about the government’s failure to address the issue systematically.

“The committee is deeply concerned about the enduring high prevalence of poverty among children,” the report says, highlighting “the effect of deprivation on children’s right to an adequate standard of living and access to adequate housing, with its negative impact on health, survival and development, and education”. The report expresses particular concern about the number of Maori and Pasifika children living in deprived circumstances. Both groups are disproportionately represented in child poverty statistics.

It calls for “urgent measures to address disparities in access to education, health services and a minimum standard of living for Maori and Pasifika children and their families” and says more effort should be invested in preserving Maori children’s cultural identity. The government of the National party is urged to take a systematic approach to tackling child poverty, and to establish a “national definition” to measure child poverty, something it has repeatedly refused to do. The Green party co-leader Metiria Turei welcomed the UN report. “The national government has repeatedly denied the seriousness of the problem and deserves the criticism it has received from the committee,” she said. “And that means thousands on NZ children are missing out on their chance for a decent life, especially Maori and Pasifika children.”

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What is more sickening, that the Saudis do this, or that we insist on continuing to call them our friends? “..the stoning, amputation and flogging of children..” does not belong in our world.

UN Watchdog Demands Saudis Stop Child Executions (AFP)

UN rights experts demanded Friday that Saudi Arabia immediately overturn laws allowing for the execution of children, and for punishments of minors including stonings, amputations and flogging. In a report on the plight of children in the wealthy Gulf state, a UN committee took Riyadh to task for allowing minors to be sentenced as adults, including to harsh corporal punishment and even the death penalty. The United Nations Committee on the Rights of the Child also criticised what it called Saudi Arabia’s systematic discrimination against girls, who are not considered full subjects, and who can be married off as early as nine years of age.

In its report, the committee expressed its “deepest concern” that Saudi Arabia “tries children above 15 years as adults and continues to sentence to death and to execute persons for offences that they allegedly committed when they were under the age of 18”. The committee, which is composed of 18 independent experts who monitor the implementation of the UN Convention on the Rights of the Child, pointed to a number of cases where minors had been sentenced to death. It said that at least four of the 47 people executed on January 2 this year were under 18 when they were sentenced to death.

And it demanded that Riyadh “immediately halt the execution” of those currently on death row who allegedly committed their crimes when they were minors, including Ali Mohammed Baqr al-Nimr, Abdullah Hasan al-Zaher, and Salman Bin Ameen Bin Salman Al-Qureish. Committee chairman Benyam Mezmur told reporters Saudi Arabia was only one of five countries, alongside China, Iran, Pakistan, and the Maldives, where child rights experts had ever needed to raise concerns about executions. “This is a very, very serious issue,” he said. The committee also demanded that Saudi Arabia immediately repeal laws permitting “the stoning, amputation and flogging of children”.

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